31. The office building your company is considering acquiring has an acquisition price of $2,500,000 and your company only buys all-cash. If net cash flows are Yr. 1 and 2= $195,000 then Yrs. 3,4 and 5 are $225,000 and your company thinks they can sell the building at the end of Yr 5 at $3,700,000, what is the NPV of this deal if your company uses a 12% discount rate?
Questions 31-40 are four (4) points each. Your employer, Kent, investment in an office building that has the following cash flows:
Purchase in Year 0 ... $-3,750,000
Year 1 ... 270,000
Year 2 ... 296,000
Year 3 ... 320,000
Year 4 ... 339,000
Year 5 ... 450,000, and a sale @ $4,190,000 takes place EOY 5
The company's weighted average cost of capital that they use as their discount rate for such calculations is 9%
32. What is the project's IRR?
33. For Kent LLC whatis the NPV?
34. In the above problem, you might expect
a. The Yield to be higher than the discount rate because you sold the property at a
profit.
b. The NPV to be positive because the IRR is higher than the discount rate
c. The NPV to be negative because the IRR is lower than the discount rate
d. All of the above
35. The Dow Jones Industrial Average is made up of
a. 10 companies
b. The largest 1,000 companies in the world
c. 30 blue chip companies, not all of which are heavy industrial companies
d. 100 companies with large cap market value