Finance Test with Answers

The first project proposal is Match My Doll Clothing line expansion consisted of expanding matching doll and child’s clothing and accessories. The second project proposal is Design Your Own Doll by creating customizable “one of a kind” doll features through the company’s website. The project selection criteria would base on quantitative and qualitative analysis. The quantitative analysis would base on the evaluation of discounting cash flow forecasts to determining the Net Present Value (NPV), Internal Rate of Return (IRR), and the Payback period of each proposed project. The qualitative analysis would include the potential project value of the company’s overall strategy, innovation, key project risks, and the project interdependencies to the whole company.

b) The decision to invest in projects increases the shareholders value of the company. This is consistent with the growth and from the NPV criteria, positive NPV of projects increases the shareholder's value.

Project A: This project is new to your company. You do not feel confident in estimating the project costs using internal resources. There are other companies that have done this type of work. Yet you still want the most accurate estimates possible.

| |finance the balance. How much will each monthly loan payment be if they can borrow the necessary funds for 30 years at 9% per |

B. The present value of an annuity is unaffected by the number of the annuity payments.

d. If you can earn 9% per year, how much will you have to save each year if you want to retire in 40 years with $3 million?

b. What is the present value of this annuity if the opportunity cost rate is 10% annually? 10% compounded semiannually?

1a. You get the same prize but the choice changes to $5,000 now or $5,250 in three years. What do you do?

2. If you had a payment that was due you in 5 years for $50,000 and you could earn a 5% rate of return, how much

If you invest in the project after five years you will get $ 463,188.77 which is $ 13,188.77 more.

Scenario; support the reasons for recommending and accepting the financial implications of Project A over the superiors choice for Project B.

A target payback period will be set by the company and the proposals that recover their initial cost within this time will be acceptable. If a comparison is made between two or more options then the choice will be project with the fastest payback.

later in the project life. With a NPV of less than -$810,000, Scenario 6 is the project with the

2. Compute the NPV of both projects. Which would you recommend? What if they are not mutually exclusive?

The present value of expected cash outflows is greater than the present value of expected cash inflows