Quantitative Methods MCQ - Quantitative Methods Section 1

6 The incremental after-tax cash flows of a project are given below:

Year	0	1	2	3	4
Cash flow (€)	-50,000	25,000	20,000	10,000	3,000

Using 12 percent as the discount rate, the NPV (in €) of the project is closest to:

Enter the given cash flows and the given discount rate into a financial calculator and solve for NPV. CF0 = –50,000, CF1 = 25,000, CF2 = 20,000, CF3 = 10,000, CF4 = 3,000, i = 12%. Compute PV. The NPV is –2,710.

7 Alexander Stan plans to invest $1.5 million in a project today. The project is expected to pay $200,000 per year in perpetuity. The cost of capital is 8 percent. Will Stan benefit by investing in the project, as judged by the NPV rule?

8 A project requires an initial outlay of $750,000. It is expected to produce $200,000 in the first year, $300,000 in the second year, and $400,000 in the third year. The project’s opportunity cost of capital is 10 percent. Which of the following is most likely the net present value of the project?

Using a financial calculator, enter the following cash flows to compute NPV. CF0 = -750,000; CF1 = 200,000; CF2 = 300,000; CF3 = 400,000; I = 10; CPT NPV = -19,722.

9 Billy Bowden intends to invest $1.5 million in a project today. The project’s expected cash flows are $200,000 per year in perpetuity. The cost of capital is 8 percent. Should Bowden invest in the project based on the IRR rule?

10 A project requires an initial outlay of $750,000. It is expected to produce cash flows of $200,000 in the first year, $300,000 in the second year, and $400,000 in the third year. The cost of capital for this project is 10%. What is the internal rate of return of the project?

Using a financial calculator, enter the following cash flows to compute IRR. CF0 = -750,000, CF1 = 200,000, CF2 = 300,000, CF3 = 400,000, CPT IRR = 8.65%.

Quantitative Methods MCQ - Quantitative Methods Section 1

CFA Level 1 Quantitative Methods Practice Questions – Section 1

Who Can Benefit from CFA Quantitative Methods Practice Questions?

Topics Covered in CFA Quantitative Methods Section 1

CFA Level 1 Quantitative Methods Practice Searches

CFA Level 1 Quantitative Methods Practice Questions

CFA Quantitative Methods MCQs with Answers

CFA Level 1 Time Value of Money Questions

CFA Present Value and Future Value MCQs

CFA Compounding and Discounting Practice Questions

CFA Annuity and Perpetuity Questions

CFA Effective Annual Rate Practice Questions

CFA Holding Period Return Questions

CFA Arithmetic Mean and Geometric Mean Questions

CFA Level 1 Descriptive Statistics Questions

CFA Coefficient of Variation Practice Questions

CFA Level 1 Quantitative Methods Exam Preparation

Accessibility