5. Agribusiness Finance

Investment Analysis — Quiz

Test your understanding of investment analysis with 5 practice questions.

Practice Questions

Question 1

A project requires an initial investment of \100{,}000 and is expected to generate cash inflows of \40{,}000 at the end of Year 1, \50{,}000 at the end of Year 2, and \60{,}000 at the end of Year 3. Using a discount rate of 10\%, what is the project's NPV (rounded to the nearest dollar)?

Question 2

A firm finances a project with 60\% equity at a cost of 12\% and 40\% debt at a cost of 6\%. The corporate tax rate is 30\%. What is the firm's WACC (rounded to two decimals)?

Question 3

Under the Capital Asset Pricing Model (CAPM), if the risk-free rate is 3\%, the expected market return is 9\%, and a project’s beta is 1.2, what is the required return?

Question 4

If the present value of a project's future cash inflows is \130{,}000 and the initial investment is \100{,}000, what is the profitability index (PI)?

Question 5

An agribusiness project yields NPVs of \50{,}000 in a best-case scenario (probability 0.3), \20{,}000 in a base-case scenario (probability 0.5), and -\10{,}000 in a worst-case scenario (probability 0.2). What is the project's expected NPV?