1. A project’s cash flows are as follows:
Year 0: Outflow of $1200
Year 1: Outflow of $2420
Year 2: Nothing
Year 3: Inflow of $363
After Year 3: Year 3 cash flow is expected to grow indefinitely at an annual rate of 4%.
The cost of capital is 10%.
What is the project's NPV?

2. The cost of capital of a project is 10%. The project requires an investment of $1000 in Year 0. It will produce identical cash flows in perpetuity from Year 1. The IRR of the project is 10%. What is the cash flow in Year 1?

3. You own 100 out of the 2000 shares of a firm. The firm announces a project today (Year 0) which everyone agrees has a net present value in Year 0 of $1200. The investment in the project, $400, will be made one year from now (Year 1) and the project will conclude (that is, the final cash flows will be realized) in Year 5. Cash inflows in each year (Year 2 to Year 5) are expected to be identical. The cost of capital is 8%.
(a)What is your change in wealth because of the discovery of the project?
(b)This change in wealth in the previous problem occurs when?
In Year 0
__In Year 1
__In Year 5
__Uniformly between Year 0 and Year 5
__Uniformly between Year 1 and Year 5

4. A project needs an investment of $1000 in Year 0. It is expected to produce cash flows of $400 in each of the next 5 years (Years 1 – 5). What is the average annual expected rate of return of this project? Express your answer in percentage terms, rounded to two decimals.

5. A firm is considering a project with the following expected cash flows (below). What is the payback period (not the discounted payback period)? Express your answer in years, rounded to one decimal.
Year       CF
0       -$5000
1          $1000
2          $2000
3          $4000
4          $1500

1. A project’s cash flows are as follows: Year 0: Outflow of $1200...