Assignment

QUESTION 1

Orange Inc. is currently considering a project that will produce cash inflows of $9,000 a year for two years followed by $6,500 a year for three more years. The cost of the project is $18,000. What is the profitability index if the discount rate is 13 percent?

1.50

1.81

1.71

1.66

QUESTION 2

You are considering an investment project with the cash flows of -500 (the initial cash flow), 650 (cash flow at year 1), -100 (cash flow at year 2). Given the discount rate of 10%, compute the Modified Internal Rate of Return (MIRR) using the combination approach.

11.56%

11.21%

10.78%

10.91%

QUESTION 3

While evaluating alternatives, all of the following are appropriate questions you could ask before making a major purchase except

Is it possible to delay the purchase or to do without the item?

Should I pay for the item with cash or buy it on credit?

Which brands should I consider?

How do the price, quality, and service compare at different stores?

All of these are questions that should be asked.

Read the article and provide a good summary in one paragraph. A good summary is written in your own words (not a cut and paste), and covers all the important points and should not include side points.