1.
Consider the following cash flows:
Year
Cash Flow
0
–$6,600
1
1,900
2
3,900
3
1,700
4
1,400
What is the
payback period
for the cash flows?
(Do not round intermediate
calculations and round your answer to 2 decimal places, e.g., 32.16.)

2.
You’re trying to determine whether or not to expand your business by building a new
manufacturing plant. The plant has an installation cost of $20.6 million, which will be
depreciated straight-line to zero over its four-year life.
If the plant has projected net income of $1,915,000, $2,195,000, $2,134,000, and
$1,376,000 over these four years, what is the project’s average accounting return
(AAR)?
(Do not round intermediate calculations and enter your answer as a percent
rounded to
2 decimal places, e.g., 32.16.)
%

3.
For the given cash flows, suppose the firm uses the NPV decision rule.
Year
Cash Flow
0
–$161,000
1
55,000
2
84,000
3
68,000

At a required return of 9 percent, what is the NPV of the project?
(Do not round intermediate
calculations and round your answer to 2 decimal places, e.g.,
32.16.)

At a required return of 21 percent, what is the NPV of the project?
(A negative answer should be
indicated by a minus sign. Do not round intermediate calculations and round your answer to
2 decimal places, e.g.,
32.16.)

4.
A project that provides annual cash flows of $2,500 for nine years costs $10,300 today.
At a required return of 10 percent, what is the NPV of the project?
(Do not round
intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

At a required return of 26 percent, what is the NPV of the project?
(A negative answer