A) Cannot be used when deciding between two mutually exclusive projects. B) Is more useful to decision makers than the internal rate of return when comparing different sized projects. C) Is easy to explain to non-financial managers and thus is the primary method of analysis used by the lowest levels of management. D) Is computed the same as present value when using excel spreadsheets to analyze a project. E) Is very similar in its methodology to the average accounting return. A) Cannot be used when deciding between two mutually exclusive projects. B) Is more useful to decision makers than the internal rate of return when comparing different sized projects. C) Is easy to explain to non-financial managers and thus is the primary method of analysis used by the lowest levels of management. D) Is computed the same as present value when using excel spreadsheets to analyze a project. E) Is very similar in its methodology to the average accounting return.

Exam 9: Net Present Value and Other Investment Criteria

A project has an initial cost of $1,900. The cash inflows are $0, $500, $900, and $700 over the next four years, respectively. What is the payback period?

(Multiple Choice)

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Question 201

Net present value:

(Multiple Choice)

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Question 202

The Winston Co. is considering two mutually exclusive projects with the following cash flows. The crossover rate is _ and if the required rate is higher than the crossover rate then project _ should be accepted.

(Multiple Choice)

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Question 203

You are considering the following two mutually exclusive projects. Both projects will be depreciated using straight-line depreciation to a zero book value over the life of the project. Neither project has any salvage value. Based upon the profitability index (PI) and the information provided in the problem, you should:

(Multiple Choice)

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Question 204

The Jensen Company has compiled the following information about a project it is considering. What is the average accounting rate of return on this project?

(Multiple Choice)

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Question 205

You are considering two independent projects with the following cash flows. The required return for both projects is 12 %. Given this information, which one of the following statements is correct?

(Multiple Choice)

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Question 206

Without using formulas, provide a definition of profitability index (PI).

(Essay)

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Question 207

The difference between the market value of an investment and its cost is the:

(Multiple Choice)

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Question 208

Consider a project with an initial investment and positive future cash flows. As the discount rate is increased the ___________________.

(Multiple Choice)

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Question 209

The principle that an investment should be accepted if the difference between the investment's market value and its cost is positive and rejected if the difference is negative is referred to as the:

(Multiple Choice)

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Question 210

A 25- year project has a cost of $1,500,000 and has annual cash flows of $400,000 in years 1-15, and $200,000 in years 16-25. The company's required rate is 14%. Given this information, calculate the IRR of the project.

(Multiple Choice)

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Question 211

A 30 year project is estimated to cost $35 million dollars and provide annual cash flows of $5 per year in years 1-5; $4 million per year in years 6-20 and $2 million per year in years 21-30. If the company's required rate of return is 10%, determine the discounted payback for the project.

(Multiple Choice)

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Question 212

You are considering the following two mutually exclusive projects with the following cash flows. Both projects will be depreciated using straight-line depreciation to a zero book value over the life of the project. Neither project has any salvage value. You should accept Project _ because its net present value exceeds that of the other project by _.

(Multiple Choice)

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Question 213

What is the payback period of a $40,000 investment with the following cash flows?

(Multiple Choice)

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Question 214

The average accounting return calculation takes the time value of money into account.

(True/False)

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Question 215

A project costs $475 and has cash flows of $100 for the first three years and $75 in each of the project's last five years. What is the payback period of the project?

(Multiple Choice)

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Question 216

A project has been assigned a required annual accounting return of 14% and a required discount rate of 9%. The initial cost of the project is $25,000. The project produces annual cash flows of $9,876 a year for three years. What is the profitability index of this project?

(Multiple Choice)

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Question 217

Calculate the IRR of a 20-year project with a cost of $400,000 and annual cash flows of $50,000 in years 1-10 and $25,000 in years 11-20. The company's required rate of return is 10%.

(Multiple Choice)

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Question 218

Which of the following is NOT correct?

(Multiple Choice)

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Question 219

The internal rate of return method of analysis may lead to incorrect decisions when comparing mutually exclusive projects.

(True/False)

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Question 220

Showing 201 - 220 of 415

Exam 9: Net Present Value and Other Investment Criteria

A project has an initial cost of $1,900. The cash inflows are $0, $500, $900, and $700 over the next four years, respectively. What is the payback period?

Net present value:

The Winston Co. is considering two mutually exclusive projects with the following cash flows. The crossover rate is _____ and if the required rate is higher than the crossover rate then project _____ should be accepted.

The Jensen Company has compiled the following information about a project it is considering. What is the average accounting rate of return on this project?

You are considering two independent projects with the following cash flows. The required return for both projects is 12 %. Given this information, which one of the following statements is correct?

Without using formulas, provide a definition of profitability index (PI).

The difference between the market value of an investment and its cost is the:

Consider a project with an initial investment and positive future cash flows. As the discount rate is increased the ___________________.

The principle that an investment should be accepted if the difference between the investment's market value and its cost is positive and rejected if the difference is negative is referred to as the:

A 25- year project has a cost of $1,500,000 and has annual cash flows of $400,000 in years 1-15, and $200,000 in years 16-25. The company's required rate is 14%. Given this information, calculate the IRR of the project.

A 30 year project is estimated to cost $35 million dollars and provide annual cash flows of $5 per year in years 1-5; $4 million per year in years 6-20 and $2 million per year in years 21-30. If the company's required rate of return is 10%, determine the discounted payback for the project.

What is the payback period of a $40,000 investment with the following cash flows?

The average accounting return calculation takes the time value of money into account.

A project costs $475 and has cash flows of $100 for the first three years and $75 in each of the project's last five years. What is the payback period of the project?

A project has been assigned a required annual accounting return of 14% and a required discount rate of 9%. The initial cost of the project is $25,000. The project produces annual cash flows of $9,876 a year for three years. What is the profitability index of this project?

Calculate the IRR of a 20-year project with a cost of $400,000 and annual cash flows of $50,000 in years 1-10 and $25,000 in years 11-20. The company's required rate of return is 10%.

Which of the following is NOT correct?

The internal rate of return method of analysis may lead to incorrect decisions when comparing mutually exclusive projects.

Introduction to Corporate Finance

Financial Statements, Cash Flow, and Taxes

Working With Financial Statements

Long-Term Financial Planning and Corporate Growth

Introduction to Valuation: the Time Value of Money

Discounted Cash Flow Valuation

Interest Rates and Bond Valuation

Stock Valuation

Making Capital Investment Decisions

Project Analysis and Evaluation

Lessons From Capital Market History

Return, Risk, and the Security Market Line

Cost of Capital

Raising Capital

Financial Leverage and Capital Structure Policy

Dividends and Dividend Policy

Short-Term Finance and Planning

Cash and Liquidity Management

Credit and Inventory Management

International Corporate Finance

Leasing

Mergers and Acquisitions

Enterprise Risk Management

Options and Corporate Securities

Behavioural Finance: Implications for Financial Management

Filters

The Winston Co. is considering two mutually exclusive projects with the following cash flows. The crossover rate is _ and if the required rate is higher than the crossover rate then project _ should be accepted.