Chapter 11: The Basics of Capital Budgeting
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d. 41.45
e. 55.10
78. Simms Corp. is considering a project that has the following cash flow data. What is the project’s IRR? Note that a
project’s projected IRR can be less than the WACC or negative, in both cases it will be rejected.
Year 0 1 2 3
Cash flows -$1,125 $425 $425 $425
a. 4.96%
b. 5.81%
c. 7.12%
d. 6.14%
e. 6.53%
Chapter 11: The Basics of Capital Budgeting
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b. 2.28 years
c. 2.02 years
d. 2.12 years
e. 2.00 years
83. Susmel Inc. is considering a project that has the following cash flow data. What is the project’s payback?
Year 0 1 2 3
Cash flows –$500 $150 $200 $300
a. 2.50 years
b. 1.90 years
c. 2.63 years
d. 1.93 years
e. 2.40 years
Chapter 11: The Basics of Capital Budgeting
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c. $377.68
d. $339.59
e. $345.94
86. Warnock Inc. is considering a project that has the following cash flow and WACC data. What is the project’s NPV?
Note that a project’s projected NPV can be negative, in which case it will be rejected.
WACC: 10.00%
Year 0 1 2 3
Cash flows -$1,050 $500 $400 $300
a. -$42.25
b. -$30.01
c. -$34.35
d. -$48.96
e. -$39.48
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90. Simkins Renovations Inc. is considering a project that has the following cash flow data. What is the project’s IRR?
Note that a project’s projected IRR can be less than the WACC (and even negative), in which case it will be rejected.
Year 0 1 2 3 4
Cash flows –$825 $300 $290 $280 $270
a. 13.59%
b. 17.24%
c. 11.40%
d. 15.20%
e. 14.61%
91. Maxwell Feed & Seed is considering a project that has the following cash flow data. What is the project’s IRR? Note
that a project’s projected IRR can be less than the WACC (and even negative), in which case it will be rejected.
Year 0 1 2 3 4 5
Cash flows -$6,250 $2,000 $2,025 $2,050 $2,075 $2,100
a. 18.18%
b. 23.11%
c. 17.62%
d. 18.94%
e. 14.40%
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forecasted NPV? Note that a project’s projected NPV can be negative, in which case it should be rejected.
Old WACC: 8.00% New WACC: 8.25%
Year 0 1 2 3
Cash flows -$1,000 $410 $410 $410
a. -$3.66
b. -$4.27
c. -$4.75
d. -$5.46
e. -$5.18
94. Ehrmann Data Systems is considering a project that has the following cash flow and WACC data. What is the project’s
MIRR? Note that a project’s projected MIRR can be less than the WACC (and even negative), in which case it will be
rejected.
WACC: 9.75%
Year 0 1 2 3
Cash flows -$1,000 $450 $450 $450
a. 14.11%
b. 15.52%
c. 15.81%
d. 10.72%
e. 17.22%
