Use the Following Information for the Next Four Questions $\begin{array}{ll}\text { Year } & \$ \\1 & \$ 40,000 \\2 & \$ 60,000 \\3 & \$ 90,000 \\4 & \$ 90,000 \\5 & \$ 90,000\end{array}$

question 30

Essay

Use the following information for the next four questions. Norlin Corporation is considering an expansion project that will begin next year (Time 0). Norlin's cost of capital is 12%. The initial cost of the project will be $250,000, and it is expected to generate the following cash flows over its five-year life:
$\begin{array}{ll}\text { Year } & \$ \\1 & \$ 40,000 \\2 & \$ 60,000 \\3 & \$ 90,000 \\4 & \$ 90,000 \\5 & \$ 90,000\end{array}$ a. What is the payback period for the expansion project?
a. 3.67 years
b. 4.00 years
c. 4.25 years
d. 4.67 years
e. 5.00 years

b. What is the net present value (NPV) of for the expansion project?
a. ($45,197)
b. $ 5,871
c. $ 13,784
d. $ 25,726
e. $120,000

c. What is the internal rate of return (IRR) for the expansion project?
a. 4.13%
b. 6.50%
c. 10.36%
d. 12.83%
e. 14.67%

d. What is the Profitability Index (PI) for the expansion project?
a. 1.02
b. 1.05
c. 1.10
d. 1.48
e. Cannot be determined

Recognize the impact of monopolist pricing strategies, including nondiscriminating and price discrimination methods.

Interpret revenue curves and their relevance to monopolistic pricing and output decisions.

Assess the role of barriers to entry in maintaining monopoly power.

Understand the implications of monopolistic practices on economic welfare.

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Definitions:

Sample Size

The number of observations or data points collected in a study or used in a statistical analysis, crucial for the validity and reliability of results.

T-Values

Statistics used in T-tests that compare the means of two groups. They indicate how many standard deviations an observed sample mean is from the null hypothesis mean.

Z-Values

Standardized scores that indicate how many standard deviations an element is from the mean.

Sample Size

The number of observations or data points used in a statistical sample.