A machine has a cost of $5,575,000. It will produce cash inflows of $1,825,000 (Year 1); $1,775,000

A machine has a cost of $5,575,000. It will produce cash inflows of $1,825,000 (Year 1); $1,775,000 (Year 2); $1,630,000 (Year 3); $1,585,000 (Year 4); and $1,650,000 (Year 5). At a   of 16.25%, the project should be

A) accepted.

B) rejected.

C) discounted at a lower rate.

D) abandoned after the first year.

Which of the following is the correct equation to solve for the NPV of the project that has an initial outlay of $30,000, followed by three years of $20,000 in incremental cash inflow? Assume a discount rate of 10%.

A) NPV = -30,000 + (3 × 20,000)/(1.10)3

B) NPV = -$30,000 + $20,000/(1.10)1 + $20,000/(1.10)2 + $20,000/(1.10)3 

C) NPV = -$30,000 + $20,000/(1.01).10 + $20,000/(1.02).10 + $20,000/(1.03).10 

D) NPV = -$30,000 + $20,000/(1.1).10 + $20,000(1.2).10 + $20,000(1.3).10

Project Full Moon has an initial outlay of $30,000, followed by positive cash flows of $10,000 in year 1, $15,000 in year 2, and $15,000 in year 3. The project should be accepted if the required rate of return is

A) greater than 0.

B) less than 14.6%.

C) less than 16.25%.

D) greater than 12%.

Which of the following is a correct EXCEL formula to solve for the net present value of a project.

A) =NPV (k,CF1, CF2,...CFn)+CF0

B) =NPV (k,CF0,CF1, CF2,...CFn)

C) =NPV (CF0,CF1, CF2,...CFn)

D) =NPV (CF1, CF2,...CFn)+CF0

WSU Inc. has various options for replacing a piece of manufacturing equipment. The present value of costs for option Ell is $84,000. Option Ell has a useful life of 5 years; annual operating costs were discounted at 9%. What is the equivalent annual cost?

A) $16,800

B) $21,595.77

C) $14,035.77

D) $18,312

The equivalent annual cost (EAC) method is appropriate for evaluating accessibility projects mandated by the Americans With Disabilities Act.

Answer:  TRUE

The required rate of return represents the cost of capital for a project.

Answer:  TRUE

The higher the discount rate, the greater the importance of the early cash flows.

Answer:  TRUE

The equivalent annual cost (EAC) method is helpful for mutually exclusive projects with unequal economic lives.

Answer:  TRUE