41 gamma corp is considering an investment opportunity with the following expected n 4306350
41) Gamma Corp. is considering an investment opportunity with the following expected net cash inflows: Year 1, $250,000; Year 2, $350,000; Year 3, $395,000. The company uses a discount rate of 12%, and the initial investment is $750,000.
The following table is available:
Present Value of $1:
10% 
12% 
14% 
15% 

1 
0.909 
0.893 
0.877 
0.870 
2 
0.826 
0.797 
0.769 
0.756 
3 
0.751 
0.712 
0.675 
0.658 
4 
0.683 
0.636 
0.592 
0.572 
5 
0.621 
0.567 
0.519 
0.497 
The IRR of the project will be ________.
A) less than 12%
B) between 12% and 13%
C) between 14% and 15%
D) more than 12%
42) Glades Thread Company is evaluating an investment that will cost $520,000 and will yield cash flows of $300,000 in the first year, $200,000 in the second year, and $100,000 in the third and the final year. Use the table below and determine the internal rate of return.
Present value of $1:
8% 
9% 
10% 
11% 

1 
0.926 
0.917 
0.909 
0.901 
2 
0.857 
0.842 
0.826 
0.812 
3 
0.794 
0.772 
0.751 
0.731 
4 
0.735 
0.708 
0.683 
0.659 
5 
0.681 
0.65 
0.621 
0.593 
The IRR of the project will be ________.
A) between 9% and 10%
B) less than 8%
C) less than 9%, more than 8%
D) more than 10%
43) Candela Cable Company is considering investing $450,000 in telecommunications equipment that would have an estimated life of 5 years with no residual value. The cash flows are as shown below:
Year 1 
$120,000 
2 
$235,000 
3 
$140,000 
4 
$98,000 
The present value of $1 factors are given below:
10% 
12% 
13% 
14% 

1 
0.909 
0.893 
0.885 
0.877 
2 
0.826 
0.797 
0.783 
0.769 
3 
0.751 
0.712 
0.693 
0.675 
4 
0.683 
0.636 
0.613 
0.592 
5 
0.621 
0.567 
0.543 
0.519 
The IRR of the project would be ________.
A) between 12% and 13%
B) more than 13%
C) less than 10%
D) between 8% and 10%
44) Gamma Corp. is considering an investment opportunity with the following expected net cash inflows: Year 1, $250,000; Year 2, $350,000; Year 3, $395,000. Residual value of the investment would be $50,000. The company uses a discount rate of 12%, and the initial investment is $400,000. Calculate the NPV of the investment.
Present value of $1:
11% 
12% 
13% 
14% 

1 
0.901 
0.893 
0.885 
0.877 
2 
0.812 
0.797 
0.783 
0.769 
3 
0.731 
0.712 
0.693 
0.675 
4 
0.659 
0.636 
0.613 
0.592 
5 
0.593 
0.567 
0.543 
0.519 
45) Gamma Corp. is considering an investment opportunity with the expected net cash inflows of $300,000 for four years. Residual value of the investment would be $70,000. The company uses a discount rate of 14%, and the initial investment is $290,000. Calculate the NPV of the investment.
Present value of annuity of $1:
12% 
13% 
14% 
15% 

1 
0.893 
0.885 
0.877 
0.87 
2 
1.69 
1.668 
1.647 
1.626 
3 
2.402 
2.361 
2.322 
2.283 
4 
3.037 
2.974 
2.914 
2.855 
5 
3.605 
3.517 
3.433 
3.352 
Present value of $1:
12% 
13% 
14% 
15% 

1 
0.893 
0.885 
0.877 
0.87 
2 
0.797 
0.783 
0.769 
0.756 
3 
0.712 
0.693 
0.675 
0.658 
4 
0.636 
0.613 
0.592 
0.572 