Compute the NPV for Project X with the cash flows shown as follows if the appropriate cost of capital is 9 percent. \[\begin{array}{l} \begin{array} {| l | l | l | l | l | l | l |} \hline\text {Time: }&0&1&2&3&4&5\\ \hline\text {Cash flow:}&-1,000&-75&100&100&0&2,000\\\hline \end{array} \end{array}\]

A) ?$639.96 B) $360.04 C) $392.44 D) $486.29 A) ?$639.96 B) $360.04 C) $392.44 D) $486.29

Compute the MIRR for Project Y and accept or reject the project with the cash flows shown as follows if the appropriate cost of capital is 12 percent. \[\begin{array}{l} \begin{array} {| l | l | l | l | l | l | l |} \hline\text {Time: }&0&1&2&3&4&5\\ \hline\text {Cash flow:}&-5,000&1,000&1,000&0&2,000&2,000\\\hline \end{array} \end{array}\]

A) 7.62 percent, accept B) 7.62 percent, reject C) 47.09 percent, accept D) 47.09 percent, reject A) 7.62 percent, accept B) 7.62 percent, reject C) 47.09 percent, accept D) 47.09 percent, reject

Compute the NPV statistic for Project X given the following cash flows if the appropriate cost of capital is 12 percent. Project X \[\begin{array} { c c c c c c } \text { Time } & 0 & 1 & 2 & 3 & 4 \\ \text { Cash Flow } & - \$ 15,000 & \$ 6,000 & \$ 10,000 & \$ 12,000 & - \$ 1,000 \end{array}\]

A) $6,234.93 B) $7,505.96 C) $8,417.80 D) $37,505.96 A) $6,234.93 B) $7,505.96 C) $8,417.80 D) $37,505.96

Suppose your firm is considering two independent projects with the cash flows shown as follows. The required rate of return on projects of both of their risk class is 12 percent, and the maximum allowable payback and discounted payback statistic for the projects are two and a half and three years, respectively. \[\begin{array}{l} \begin{array} {| l | l | l | l | l | } \hline\text {Time: }&0&1&2&3\\ \hline\text {Project A Cash flow:}&-5,000&1,000&3,000&5,000\\ \hline\text {Project b Cash flow:}&-10,000&5,000&5,000&5,000\\\hline \end{array} \end{array}\] Use the discounted payback decision rule to evaluate these projects; which one(s) should be accepted or rejected?

A) Accept both A and B B) Accept neither A nor B C) Accept A, reject B D) Reject A, accept B A) Accept both A and B B) Accept neither A nor B C) Accept A, reject B D) Reject A, accept B

Suppose your firm is considering two independent projects with the cash flows shown as follows. The required rate of return on projects of both of their risk class is 12 percent, and the maximum allowable payback and discounted payback statistic for the projects are two and a half and three years, respectively. \[\begin{array}{l} \begin{array} {| l | l | l | l | l | } \hline\text {Time: }&0&1&2&3\\ \hline\text {Project A Cash flow:}&-5,000&1,000&3,000&5,000\\ \hline\text {Project b Cash flow:}&-10,000&5,000&5,000&5,000\\\hline \end{array} \end{array}\] Use the IRR decision rule to evaluate these projects; which one(s) should be accepted or rejected?

A) Accept both A and B B) Accept neither A nor B C) Accept A, reject B D) Reject A, accept B A) Accept both A and B B) Accept neither A nor B C) Accept A, reject B D) Reject A, accept B

Suppose your firm is considering two independent projects with the cash flows shown as follows. The required rate of return on projects of both of their risk class is 12 percent, and the maximum allowable payback and discounted payback statistic for the projects are two and a half and three years, respectively. \[\begin{array}{l} \begin{array} {| l | l | l | l | l | } \hline\text {Time: }&0&1&2&3\\ \hline\text {Project A Cash flow:}&-5,000&1,000&3,000&5,000\\ \hline\text {Project b Cash flow:}&-10,000&5,000&5,000&5,000\\\hline \end{array} \end{array}\] Use the NPV decision rule to evaluate these projects; which one(s) should be accepted or rejected?

A) Accept both A and B B) Accept neither A nor B C) Accept A, reject B D) Reject A, accept B A) Accept both A and B B) Accept neither A nor B C) Accept A, reject B D) Reject A, accept B

How many possible IRRs could you find for the following set of cash flows? \[\begin{array} { l c c c c c c } \text { Time } & 0 & 1 & 2 & 3 & 4 \\ \text { Cash Flow } & - \$ 10,000 & \$ 5,350 & \$ 4,180 & \$ 1,520 & \$ 2,000 \end{array}\]

A) 1 B) 2 C) 3 D) Unable to determine unless we have the cost of capital. A) 1 B) 2 C) 3 D) Unable to determine unless we have the cost of capital.

Compute the NPV statistic for Project Y given the following cash flows and if the appropriate cost of capital is 12 percent. Project Y \[\begin{array} { l c c c c c c c c } \text { Time } & 1 & & 2 & 3 & 4 &5\\ \text { Cash Flow } & - \$ 10,000 & \$ 3,000 & \$ 4,000 & \$ 1,000 & \$ 2,000 & \$ 500 \end{array}\]

A) $18,133,88 B) ?$1,366.99 C) ?$1,539.14 D) ?$1,866.12 A) $18,133,88 B) ?$1,366.99 C) ?$1,539.14 D) ?$1,866.12

Exam 13: Weighing Net Present Value and Other Capital Budgeting Criteria

Compute the NPV for Project X with the cash flows shown as follows if the appropriate cost of capital is 9 percent. Time: 0 1 2 3 4 5 Cash flow: -1,000 -75 100 100 0 2,000

(Multiple Choice)

4.8/5

(31)

Question 81

Compute the MIRR for Project Y and accept or reject the project with the cash flows shown as follows if the appropriate cost of capital is 12 percent. Time: 0 1 2 3 4 5 Cash flow: -5,000 1,000 1,000 0 2,000 2,000

(Multiple Choice)

4.9/5

(38)

Question 82

A project has normal cash flows. Its IRR is 15 percent and its cost of capital is 10 percent. Which of the following statements is incorrect?

(Multiple Choice)

4.8/5

(32)

Question 83

A capital budgeting technique that generates a decision rule and associated metric for choosing projects based on the total discounted value of their cash flows is referred to as

(Multiple Choice)

5.0/5

(39)

Question 84

A disadvantage of the payback statistic is that

(Multiple Choice)

4.9/5

(35)

Question 85

Compute the NPV statistic for Project X given the following cash flows if the appropriate cost of capital is 12 percent. Project X Time 0 1 2 3 4 Cash Flow -\ 15,000 \ 6,000 \ 10,000 \ 12,000 -\ 1,000

(Multiple Choice)

4.9/5

(40)

Question 86

Suppose your firm is considering two independent projects with the cash flows shown as follows. The required rate of return on projects of both of their risk class is 12 percent, and the maximum allowable payback and discounted payback statistic for the projects are two and a half and three years, respectively. Time: 0 1 2 3 Project A Cash flow: -5,000 1,000 3,000 5,000 Project b Cash flow: -10,000 5,000 5,000 5,000 Use the discounted payback decision rule to evaluate these projects; which one(s) should be accepted or rejected?

(Multiple Choice)

4.9/5

(41)

Question 87

A graph of a project's ________ is a function of cost of capital.

(Multiple Choice)

4.8/5

(43)

Question 88

Suppose your firm is considering two independent projects with the cash flows shown as follows. The required rate of return on projects of both of their risk class is 12 percent, and the maximum allowable payback and discounted payback statistic for the projects are two and a half and three years, respectively. Time: 0 1 2 3 Project A Cash flow: -5,000 1,000 3,000 5,000 Project b Cash flow: -10,000 5,000 5,000 5,000 Use the IRR decision rule to evaluate these projects; which one(s) should be accepted or rejected?

(Multiple Choice)

4.8/5

(47)

Question 89

When choosing a capital budgeting technique(s) to use, which of the following sub-choices is affected?

(Multiple Choice)

4.9/5

(32)

Question 90

Suppose your firm is considering two independent projects with the cash flows shown as follows. The required rate of return on projects of both of their risk class is 12 percent, and the maximum allowable payback and discounted payback statistic for the projects are two and a half and three years, respectively. Time: 0 1 2 3 Project A Cash flow: -5,000 1,000 3,000 5,000 Project b Cash flow: -10,000 5,000 5,000 5,000 Use the NPV decision rule to evaluate these projects; which one(s) should be accepted or rejected?

(Multiple Choice)

4.7/5

(35)

Question 91

Compute the PI statistic for Project Z and advise the firm whether to accept or reject the project with the cash flows shown as follows if the appropriate cost of capital is 10 percent. Project Z Time 0 1 2 3 4 5 Cash Flow -\ 1,000 \ 350 \ 380 \ 420 \ 300 \ 100

(Multiple Choice)

4.8/5

(34)

Question 92

Under what conditions can a rate-based statistic yield a different accept/reject decision than NPV?

(Multiple Choice)

4.9/5

(34)

Question 93

Suppose your firm is considering investing in a project with the cash flows shown as follows, that the required rate of return on projects of this risk class is 8 percent, and that the maximum allowable payback and discounted payback statistic for the project are three and three and a half years, respectively. Time 0 1 2 3 4 5 Cash Flow -100,000 30,000 45,000 55,000 30,000 10,000 Use the MIRR decision rule to evaluate this project; should it be accepted or rejected?

(Multiple Choice)

4.9/5

(36)

Question 94

All of the following are strengths of payback EXCEPT

(Multiple Choice)

4.8/5

(42)

Question 95

Suppose your firm is considering investing in a project with the cash flows shown as follows, that the required rate of return on projects of this risk class is 8 percent, and that the maximum allowable payback and discounted payback statistic for the project are three and three and a half years, respectively. Time 0 1 2 3 4 5 Cash Flow -100,000 30,000 45,000 55,000 30,000 10,000 Use the payback decision rule to evaluate this project; should it be accepted or rejected?

(Multiple Choice)

4.8/5

(42)

Question 96

How many possible IRRs could you find for the following set of cash flows? Time 0 1 2 3 4 Cash Flow -\ 10,000 \ 5,350 \ 4,180 \ 1,520 \ 2,000

(Multiple Choice)

4.9/5

(44)

Question 97

Suppose your firm is considering two mutually exclusive, required projects with the cash flows shown as follows. The required rate of return on projects of both of their risk class is 10 percent, and the maximum allowable payback and discounted payback statistic for the projects are two and a half and three and a half years, respectively. Time: 0 1 2 3 Project A Cash flow: -1,000 300 400 700 Project b Cash flow: -500 200 400 300 Use the payback decision rule to evaluate these projects; which one(s) should be accepted or rejected?

(Multiple Choice)

4.8/5

(41)

Question 98

Compute the NPV statistic for Project Y given the following cash flows and if the appropriate cost of capital is 12 percent. Project Y Time 1 2 3 4 5 Cash Flow -\ 10,000 \ 3,000 \ 4,000 \ 1,000 \ 2,000 \ 500

(Multiple Choice)

4.8/5

(35)

Question 99

Suppose your firm is considering investing in a project with the cash flows shown as follows, that the required rate of return on projects of this risk class is 8 percent, and that the maximum allowable payback and discounted payback statistics for the project are three and a half and four and a half years, respectively. Use the MIRR decision to evaluate this project; should it be accepted or rejected? Time 0 1 2 3 4 5 6 Cash Flow -\ 5,000 \ 1,200 \ 1,400 \ 1,600 \ 1,600 \ 1,100 \ 2,000

(Multiple Choice)

5.0/5

(30)

Question 100

Compute the NPV for Project X with the cash flows shown as follows if the appropriate cost of capital is 9 percent. Time: 0 1 2 3 4 5 Cash flow: -1,000 -75 100 100 0 2,000

Compute the MIRR for Project Y and accept or reject the project with the cash flows shown as follows if the appropriate cost of capital is 12 percent. Time: 0 1 2 3 4 5 Cash flow: -5,000 1,000 1,000 0 2,000 2,000

A project has normal cash flows. Its IRR is 15 percent and its cost of capital is 10 percent. Which of the following statements is incorrect?

A capital budgeting technique that generates a decision rule and associated metric for choosing projects based on the total discounted value of their cash flows is referred to as

A disadvantage of the payback statistic is that

Compute the NPV statistic for Project X given the following cash flows if the appropriate cost of capital is 12 percent. Project X Time 0 1 2 3 4 Cash Flow -\ 15,000 \ 6,000 \ 10,000 \ 12,000 -\ 1,000

A graph of a project's ________ is a function of cost of capital.

When choosing a capital budgeting technique(s) to use, which of the following sub-choices is affected?

Compute the PI statistic for Project Z and advise the firm whether to accept or reject the project with the cash flows shown as follows if the appropriate cost of capital is 10 percent. Project Z Time 0 1 2 3 4 5 Cash Flow -\ 1,000 \ 350 \ 380 \ 420 \ 300 \ 100

Under what conditions can a rate-based statistic yield a different accept/reject decision than NPV?

All of the following are strengths of payback EXCEPT

How many possible IRRs could you find for the following set of cash flows? Time 0 1 2 3 4 Cash Flow -\ 10,000 \ 5,350 \ 4,180 \ 1,520 \ 2,000

Compute the NPV statistic for Project Y given the following cash flows and if the appropriate cost of capital is 12 percent. Project Y Time 1 2 3 4 5 Cash Flow -\ 10,000 \ 3,000 \ 4,000 \ 1,000 \ 2,000 \ 500

Introduction to Financial Management

Reviewing Financial Statements

Analyzing Financial Statements

Time Value of Money 1: Analyzing Single Cash Flows

Time Value of Money 2: Analyzing Annuity Cash Flows

Understanding Financial Markets and Institutions

Valuing Bonds

Valuing Stocks

Characterizing Risk and Return

Estimating Risk and Return

Calculating the Cost of Capital

Estimating Cash Flows on Capital Budgeting Projects

Working Capital Management and Policies

Financial Planning and Forecasting

Assessing Long-Term Debt, Equity, and Capital Structure

Sharing Firm Wealth: Dividends, Share Repurchases, and Other Payouts

Issuing Capital and the Investment Banking Process

International Corporate Finance

Mergers and Acquisitions and Financial Distress

Filters