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 8 percent, and the maximum allowable payback and discounted payback statistic for the projects are two and three years, respectively. \[\begin{array}{l} \begin{array} {| l | l | l | l | l | } \hline\text {Time: }&0&1&2&3\\ \hline\text {Project A Cash flow:}&-20,000&10,000&30,000&1,000\\ \hline\text {Project b Cash flow:}&-30,000&10,000&20,000&50,000\\\hline \end{array} \end{array}\] 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

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

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Which of these are sets of cash flows where all the initial cash flows are negative and all the subsequent ones are either zero or positive?

(Multiple Choice)

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Question 121

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 10 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 NPV decision to evaluate this project; should it be accepted or rejected? Time 0 1 2 3 4 5 6 Cash Flow -\ 85,000 \ 12,000 \ 11,000 \ 13,000 \ 21,000 \ 31,000 \ 32,000

(Multiple Choice)

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Question 122

________ is a decision making process that includes the cost of capital calculation?

(Multiple Choice)

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Question 123

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 8 percent, and the maximum allowable payback and discounted payback statistic for the projects are two and three years, respectively. Time: 0 1 2 3 Project A Cash flow: -20,000 10,000 30,000 1,000 Project b Cash flow: -30,000 10,000 20,000 50,000 Use the discounted payback decision rule to evaluate these projects; which one(s) should be accepted or rejected?

(Multiple Choice)

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Question 124

________ is a decision rule and associated methodology for converting the net present value statistic into a rate-based metric.

(Multiple Choice)

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Question 125

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Which of these are sets of cash flows where all the initial cash flows are negative and all the subsequent ones are either zero or positive?

________ is a decision making process that includes the cost of capital calculation?

________ is a decision rule and associated methodology for converting the net present value statistic into a rate-based metric.

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

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