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a. 500,000

b. 950,000

c. 106,000

d. 151,000

e. insufficient information to estimate an NPV

2. You are evaluating purchasing the rights to a project that will generate after tax expected cash flows of $90,000 at the end of each of the next five years, plus an additional $1,000,000 at the end of the fifth year as the final cash flow. You can purchase this project for $950,000. At this price, what rate of return would you earn on the investment (aka what is the internal rate of return)?

a. 10.3%

b. 7.7%

c. 9.6%

d. 52.6%

e. 15%

f. insufficient information to estimate a return rate

3. If accepting 1 project implies that you can NOT also accept another alternative project, we would say these 2 projects are:

a. mutually exclusive

b. independent

c. profitable

d. synergistic

e. none of the above

4. You are considering the purchase of an investment that would pay you $5,000 per year for Years 1 5, $3,000 per year for Years 6 8, and $2,000 per year for Years 9 and 10. If you require a 14 percent rate of return, and the cash flows occur at the end of each year, then what is the MOST you would be willing to pay for this investment?

a. $15,819.27

b. $21,937.26

c. $32,415.85