QUESTIONS 19 THROUGH 32 RELATE TO QUANTITATIVE METHODS

21. A project has the following expected cash flows:

Time Cash Flow ($)

0 (125,000)

1 100,000

2 200,000

If the risk-free interest rate is 4 percent, expected inflation is 3 percent, the market

risk premium is 8 percent and the Beta for the project is 1, the investment’s net

present value (NPV) is closest to:

A. $113,000.

B. $124,000.

C. $139,000.