1. A company is considering whether to invest in a new

project that requires an initial outlay of $100,000 and is

expected to generate net cash inflows of $30,000 per year

for five years. The company's cost of capital is 10%. What

is the net present value (NPV) of the project?

a) $50,210

b) $51,210

c) $52,210

d) $53,210*

Rationale: The NPV of the project is the sum of the present

values of the net cash inflows minus the initial outlay. The

present value of a net cash inflow of $30,000 per year for

five years at 10% is $113,210 (using a present value

annuity factor table or a financial calculator). The NPV of

the project is $113,210 - $100,000 = $53,210.

2. A company has the following information for the year

ended December 31, 2020:

Sales revenue: $500,000

Cost of goods sold: $300,000

Operating expenses: $100,000

Interest expense: $20,000

Tax rate: 30%

What is the company's net income for the year?

a) $56,000*

b) $80,000

c) $140,000

d) $200,000

Rationale: The net income for the year is the difference