Practice Quiz Chapter 07

* not completed

. Please see the PDF attachment to answer this question. Consider the following cash flow of a project. If the project's IRR is 9%, what is the value of X and is the project acceptable at MARR=7% with this value of X?

a) $5690.05 – acceptable correct incorrect

b) $3704.18 – acceptable correct incorrect

c) $5690.05 – Not acceptable correct incorrect

d) $3704.18 – Not acceptable correct incorrect

* not completed

. A machine that costs $10,000 to buy and $1,500 per year to operate will save mainly labour expenses in packaging over 5 years. The salvage value at the end of 5 years is $800. To receive a 7% rate of return on investment, what is the minimum required annual savings in labour from this machine?

a) $3124.32 correct incorrect

b) $1249.73 correct incorrect

c) $2195.45 correct incorrect

d) $3799.79 correct incorrect

* not completed

. Jina invests $250 in a savings bond that is cashed in 5 years later for $400. What is the IRR for this investment?

a) 9.85% correct incorrect

b) 8.08% correct incorrect

c) 7.02% correct incorrect

d) 4.58% correct incorrect

* not completed

. By replacing an old piece of equipment with a new one, a manufacturing company will save $40,000 in rework per year. The new machine costs $200,000 and its life is 10 years. There is no salvage value. If the company uses an 8% interest rate, should the new equipment be installed?

a) Yes correct incorrect

b) No correct incorrect

c) Indifferent correct incorrect

d) Not calculable correct incorrect

* not completed

. If you borrow $6,000 at time 0 to be paid back in 6 equal payments of $1,500, what is the IRR?

a) Between 10% and 11% correct incorrect

b) Between 9% and 10% correct incorrect

c) Between 13% and 14% correct incorrect

d) Between 12% and 13% correct incorrect

* not completed

. Venture Ltd acquired a site for $1,200,000 eight years ago and has just sold for $2,600,000. What rate of return did the company make on its investment?

a) 10.2% correct incorrect

b) 14.6% correct incorrect

c) 27.1% correct incorrect

d) 46.2% correct incorrect

* not completed

. Mr. Bean bought IBM stock 10 years ago and its value has tripled during the last ten years. What is the annual rate of the IMB stock has been growing?

a) 6.7% correct incorrect

b) 11.6% correct incorrect

c) 22.2% correct incorrect

d) 33.3% correct incorrect

* not completed

. Consider the following cash flow of a project: given the opportunity cost of capital is 20%, which project should be adopted?

a) Project A correct incorrect

b) Project B correct incorrect

c) Both projects have different rate of return correct incorrect

d) None of the projects correct incorrect

* not completed

. Consider the following cash flow of a project: what is the required rate of return for Project A and Project B to be equal?

a) 10% correct incorrect

b) 12% correct incorrect

c) 15.5% correct incorrect

d) 24.8% correct incorrect

* not completed

. Given the opportunity cost of capital is 15%, what is the modified internal rate of return for Project A?

a) 18% correct incorrect

b) 21.4% correct incorrect

c) 23.1% correct incorrect

d) 24.5% correct incorrect