McGlothin Inc.is considering a project that has the following cash flow data.What is the project's payback? \[\begin{array} { l c c c c } \text { Year } & 0 & 1 & 2 & 3 \\ \hline \text { Cash flows } & - \$ 1,150 & \$ 500 & \$ 500 & \$ 500 \end{array}\]

A) 1.86 years B) 2.07 years C) 2.30 years D) 2.53 years E) 2.78 years A) 1.86 years B) 2.07 years C) 2.30 years D) 2.53 years E) 2.78 years

Suzanne's Cleaners is considering a project that has the following cash flow data.What is the project's payback? \[\begin{array} { l c c c c c c } \text { Year } & 0 & 1 & 2 & 3 & 4 & 5 \\ \hline \text { Cash flows } & - \$ 1,100 & \$ 300 & \$ 310 & \$ 320 & \$ 330 & \$ 340 \end{array}\]

A) 2.31 years B) 2.56 years C) 2.85 years D) 3.16 years E) 3.52 years A) 2.31 years B) 2.56 years C) 2.85 years D) 3.16 years E) 3.52 years

Shannon Co.is considering a project that has the following cash flow and cost of capital (r) data.What is the project's discounted payback? \[\begin{array} { l c c c c c } & r = 10.00 \% \\ \text { Year } & 0 & 1 & 2 & 3 & 4 \\ \hline \text { Cash flows } & - \$ 950 & \$ 525 & \$ 485 & \$ 445 & \$ 405 \end{array}\]

A) 1.61 years B) 1.79 years C) 1.99 years D) 2.22 years E) 2.44 years A) 1.61 years B) 1.79 years C) 1.99 years D) 2.22 years E) 2.44 years

Exam 10: The Basics of Capital Budgeting: Evaluating Cash Flows

McGlothin Inc.is considering a project that has the following cash flow data.What is the project's payback? Year 0 1 2 3 Cash flows -\ 1,150 \ 500 \ 500 \ 500

(Multiple Choice)

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Question 61

Conflicts between two mutually exclusive projects occasionally occur, where the NPV method ranks one project higher but the IRR method ranks the other one first.In theory, such conflicts should be resolved in favor of the project with the higher positive NPV.

(True/False)

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Question 62

Suzanne's Cleaners is considering a project that has the following cash flow data.What is the project's payback? Year 0 1 2 3 4 5 Cash flows -\ 1,100 \ 300 \ 310 \ 320 \ 330 \ 340

(Multiple Choice)

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Question 63

Assume a project has normal cash flows.All else equal, which of the following statements is CORRECT?

(Multiple Choice)

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Question 64

Robbins Inc.is considering a project that has the following cash flow and cost of capital (r) data.What is the project's NPV? Note that if a project's expected NPV is negative, it should be rejected. r: 10.25\% Year 0 1 2 3 4 5 Cash flows -\ 1,000 \ 300 \ 300 \ 300 \ 300 \ 300

(Multiple Choice)

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Question 65

One advantage of the payback method for evaluating potential investments is that it provides information about a project's liquidity and risk.

(True/False)

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Question 66

Current Design Co.is considering two mutually exclusive, equally risky, and not repeatable projects, S and L.Their cash flows are shown below.The CEO believes the IRR is the best selection criterion, while the CFO advocates the NPV.If the decision is made by choosing the project with the higher IRR rather than the one with the higher NPV, how much, if any, value will be forgone, i.e., what's the chosen NPV versus the maximum possible NPV? Note that (1) "true value" is measured by NPV, and (2) under some conditions the choice of IRR vs.NPV will have no effect on the value gained or lost. r: 7.50\% Y ear 0 1 2 3 4 -\ 1,100 \ 550 \ 600 \ 100 \ 100 -\ 2,700 \ 650 \ 725 \ 800 \ 1,400

(Multiple Choice)

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Question 67

Projects S and L are both normal projects with an initial cost of $10,000, followed by a series of positive cash inflows.Project S's undiscounted net cash flows total $20,000, while L's total undiscounted flows are $30,000.At a cost of capital of 10%, the two projects have identical NPVs.Which project's NPV is more sensitive to changes in the cost of capital?

(Multiple Choice)

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Question 68

Lancaster Corp.is considering two equally risky, mutually exclusive projects, both of which have normal cash flows.Project A has an IRR of 11%, while Project B's IRR is 14%.When the cost of capital is 8%, the projects have the same NPV.Given this information, which of the following statements is CORRECT?

(Multiple Choice)

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Question 69

For a project with one initial cash outflow followed by a series of positive cash inflows, the modified IRR (MIRR) method involves compounding the cash inflows out to the end of the project's life, summing those compounded cash flows to form a terminal value (TV), and then finding the discount rate that causes the PV of the TV to equal the project's cost.

(True/False)

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Question 70

Which of the following statements is CORRECT?

(Multiple Choice)

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Question 71

Which of the following statements is CORRECT?

(Multiple Choice)

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Question 72

Consider projects S and L.Both have normal cash flows, and the projects have the same risk, hence both are evaluated with the same cost of capital, 10%.However, S has a higher IRR than L.Which of the following statements is CORRECT?

(Multiple Choice)

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Question 73

Which of the following statements is CORRECT?

(Multiple Choice)

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Question 74

Both the regular and the modified IRR (MIRR) methods have wide appeal to professors, but most business executives prefer the NPV method to either of the IRR methods.

(True/False)

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Question 75

Which of the following statements is CORRECT? Assume that the project being considered has normal cash flows, with one outflow followed by a series of inflows.

(Multiple Choice)

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Question 76

The NPV method is based on the assumption that projects' cash flows are reinvested at the project's risk-adjusted cost of capital.

(True/False)

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Question 77

If the IRR of normal Project X is greater than the IRR of mutually exclusive (and also normal) Project Y, we can conclude that the firm should always select X rather than Y if X has NPV > 0.

(True/False)

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Question 78

Shannon Co.is considering a project that has the following cash flow and cost of capital (r) data.What is the project's discounted payback? r=10.00\% Year 0 1 2 3 4 Cash flows -\ 950 \ 525 \ 485 \ 445 \ 405

(Multiple Choice)

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Question 79

The IRR method is based on the assumption that projects' cash flows are reinvested at the project's risk-adjusted cost of capital.

(True/False)

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Question 80

Showing 61 - 80 of 107

Exam 10: The Basics of Capital Budgeting: Evaluating Cash Flows

McGlothin Inc.is considering a project that has the following cash flow data.What is the project's payback? Year 0 1 2 3 Cash flows -\ 1,150 \ 500 \ 500 \ 500

Conflicts between two mutually exclusive projects occasionally occur, where the NPV method ranks one project higher but the IRR method ranks the other one first.In theory, such conflicts should be resolved in favor of the project with the higher positive NPV.

Suzanne's Cleaners is considering a project that has the following cash flow data.What is the project's payback? Year 0 1 2 3 4 5 Cash flows -\ 1,100 \ 300 \ 310 \ 320 \ 330 \ 340

Assume a project has normal cash flows.All else equal, which of the following statements is CORRECT?

Robbins Inc.is considering a project that has the following cash flow and cost of capital (r) data.What is the project's NPV? Note that if a project's expected NPV is negative, it should be rejected. r: 10.25\% Year 0 1 2 3 4 5 Cash flows -\ 1,000 \ 300 \ 300 \ 300 \ 300 \ 300

One advantage of the payback method for evaluating potential investments is that it provides information about a project's liquidity and risk.

Which of the following statements is CORRECT?

Which of the following statements is CORRECT?

Consider projects S and L.Both have normal cash flows, and the projects have the same risk, hence both are evaluated with the same cost of capital, 10%.However, S has a higher IRR than L.Which of the following statements is CORRECT?

Which of the following statements is CORRECT?

Both the regular and the modified IRR (MIRR) methods have wide appeal to professors, but most business executives prefer the NPV method to either of the IRR methods.

Which of the following statements is CORRECT? Assume that the project being considered has normal cash flows, with one outflow followed by a series of inflows.

The NPV method is based on the assumption that projects' cash flows are reinvested at the project's risk-adjusted cost of capital.

If the IRR of normal Project X is greater than the IRR of mutually exclusive (and also normal) Project Y, we can conclude that the firm should always select X rather than Y if X has NPV > 0.

Shannon Co.is considering a project that has the following cash flow and cost of capital (r) data.What is the project's discounted payback? r=10.00\% Year 0 1 2 3 4 Cash flows -\ 950 \ 525 \ 485 \ 445 \ 405

The IRR method is based on the assumption that projects' cash flows are reinvested at the project's risk-adjusted cost of capital.

An Overview of Financial Management and the Financial Environment

Financial Statements, Cash Flow, and Taxes

Analysis of Financial Statements

Time Value of Money

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Risk and Return

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Financial Options and Applications in Corporate Finance

The Cost of Capital

Cash Flow Estimation and Risk Analysis

Corporate Valuation and Financial Planning

Corporate Governance

Distributions to Shareholders: Dividends and Repurchases

Capital Structure Decisions

Supply Chains and Working Capital Management

Multinational Financial Management

Public and Private Financing: Initial Offerings, Seasoned Offerings, and Investment Banks

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Dynamic Capital Structures and Corporate Valuation

Mergers and Corporate Control

Enterprise Risk Management

Bankruptcy, Reorganization, and Liquidation

Portfolio Theory and Asset Pricing Models

Real Options

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Advanced Issues in Cash Management and Inventory Control

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