3. In comparing NPVs, what is this crossover point?
4. The project you are looking at requires regular capital investments to sustain its viability. The
projected cash flows below outline that project. How many IRRs are there for this project and
when should you accept taking this project on?
Year Cash Flow
0 -$31,000
1 $47,000
2 -$65,000
3 $63,000
4 -$39,000
5. You are looking at building on to your burger shop an additional seating wing. After getting
through planning, zoning requirements, health department regulations, as well as various other
compliance's, as well as the cost of the labor and supplies top build this wing on, you are looking
at $656k. You're required return is 10.5%. Your CPA says similar additions have had payback
periods of 7 years. What is the best case NPV? Worst case NPV?
6. In 3-4sentences, compare contrast systematic and unsystematic risk.
7. What is the Beta coefficient by definition? If you have an expected return on an investment of
8.8%, a risk-free rate of 2.1%, and a market return of 9.2%, what is the beta coefficient of the
investment? What model are you using to find that coefficient?