Based upon the following cash flows, should Chipper Nipper Cookie Company introduce a new product, Rolling In Dough Pies? The initial investment is $180,000, and the cost of capital is 11.5%. ? \[\begin{array} { | l | l | } \hline \text { Years } & \text { Cash Flows } \\ \hline 1 & \$ 80,000 \\ \hline 2 & \$ 95,000 \\ \hline 3 & \$ 95,000 \\ \hline 4 & \$ 110,000 \\ \hline 5 & \$ 110,000 \\ \hline 6 & \$ 110,000 \\ \hline \end{array}\]

A) Yes, the rounded NPV is $228, 940.00 and the IRR is 46.62%. B) Yes, the rounded NPV is $75,428.63 and the IRR is 12.27%. C) No, the rounded NPV is -$57,277.32 and the IRR is 8.75%. D) No, the rounded NPV is -$221,275.39 and the IRR is 9.97%. A) Yes, the rounded NPV is $228, 940.00 and the IRR is 46.62%. B) Yes, the rounded NPV is $75,428.63 and the IRR is 12.27%. C) No, the rounded NPV is -$57,277.32 and the IRR is 8.75%. D) No, the rounded NPV is -$221,275.39 and the IRR is 9.97%.

What is the net present value of the following project if the required rate of return is 15%? The initial investment is $150,000. ? \[\begin{array} { | l | l | } \hline \text { Years } & \text { Cash Flows } \\ \hline 1 & \$ 30,000 \\ \hline 2 & \$ 80,000 \\ \hline 3 & \$ 100,000 \\ \hline 4 & \$ 200,000 \\ \hline \end{array}\]

A) $203,690 B) $180,665 C) $150,000 D) $116,681 A) $203,690 B) $180,665 C) $150,000 D) $116,681

Should the following project be accepted if the cost of capital is 12%? Initial Investment is $50,000. ? \[\begin{array} { | l | l | } \hline \text { Years } & \text { Cash Flows } \\ \hline 1 & \$ 25,000 \\ \hline 2 & \$ 35,000 \\ \hline 3 & \$ 55,000 \\ \hline \end{array}\]

A) Yes, because the internal rate of return is 10.5%, which is less than 12%. B) Yes, because the internal rate of return is 35%, which is more than 12%. C) No, because the internal rate of return is 8.7%, which is less than 12%. D) Yes, because the internal rate of return is 48%, which is more than 12%. A) Yes, because the internal rate of return is 10.5%, which is less than 12%. B) Yes, because the internal rate of return is 35%, which is more than 12%. C) No, because the internal rate of return is 8.7%, which is less than 12%. D) Yes, because the internal rate of return is 48%, which is more than 12%.

Exam 12: Capital Budgeting: Decision Criteria and Real Option Considerations

____ options allow a firm to design into a project the capability of shifting the product mix of the project if demand or relative product prices dictate such a shift.

(Multiple Choice)

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Question 41

The objective in solving capital rationing problems is to ____.

(Multiple Choice)

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Question 42

What is the internal rate of return for a project that has a net investment of $14,600 and a single net cash flow of $25,750 in 5 years?

(Multiple Choice)

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Question 43

Based upon the following cash flows, should Chipper Nipper Cookie Company introduce a new product, Rolling In Dough Pies? The initial investment is $180,000, and the cost of capital is 11.5%. ? Years Cash Flows 1 \ 80,000 2 \ 95,000 3 \ 95,000 4 \ 110,000 5 \ 110,000 6 \ 110,000

(Multiple Choice)

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Question 44

If the net present value of an investment project is positive, then the ____.

(Multiple Choice)

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Question 45

What is the net present value of the following project if the required rate of return is 15%? The initial investment is $150,000. ? Years Cash Flows 1 \ 30,000 2 \ 80,000 3 \ 100,000 4 \ 200,000

(Multiple Choice)

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Question 46

In considering the payback method, ____.

(Multiple Choice)

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Question 47

TexMex is considering replacing its tortilla machine with a new model that sells for $46,000 including the cost of installation. The old machine has been fully depreciated and has a $0 salvage value. The new machine will be depreciated as a 3-year MACRS asset. Revenues are expected to increase $18,000 per year over the 5-year life of the new machine. At the end of 5 years the new machine is expected to have no salvage value. What is the IRR for this project if TexMex has a required rate of return of 14% and a marginal tax rate of 40%? Operating costs are not expected to increase from the current level of $8,000 per year.

(Multiple Choice)

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Question 48

What is the NPV of a project that required a net investment of $500,000 and produced net cash flows of $150,000 per year for 5 years and $110,000 for the next 5 years? Assume the cost of capital is 14%.

(Multiple Choice)

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Question 49

Which of the following statements about comparing capital budget techniques is (are) correct? I. The payback period is easy to understand and helps the firm identify how long it will be unable to use the initial investment for other projects. II. Mutually exclusive projects allow a firm to do other like projects (mutually exclusive) simultaneously as long as the budget constraints are met.

(Multiple Choice)

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Question 50

In the case of mutually exclusive projects, NPV and PI are likely to yield conflicting decisions when ____.

(Multiple Choice)

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Question 51

When evaluating international capital expenditure projects, the analyst may compute the present value of the net cash flows in the local currency and then ____.

(Multiple Choice)

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Question 52

The of an investment is the period of time for the to equal the initial cash outlay.

(Multiple Choice)

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Question 53

What is the internal rate of return for a project that has a net investment of $76,000 and net cash flows of $20,507 per year for 7 years?

(Multiple Choice)

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Question 54

An investment project requires a net investment of $100,000. The project is expected to generate annual net cash inflows of $28,000 for the next 5 years. The firm's cost of capital is 12%. Determine the internal rate of return for the project (to the nearest tenth of one percent).

(Multiple Choice)

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Question 55

Should the following project be accepted if the cost of capital is 12%? Initial Investment is $50,000. ? Years Cash Flows 1 \ 25,000 2 \ 35,000 3 \ 55,000

(Multiple Choice)

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Question 56

In the absence of capital rationing, the net present value method is normally superior to the ____ method when choosing among mutually exclusive investments. I. internal rate of return II. profitability index

(Multiple Choice)

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Question 57

In working with capital budgeting, what does a post-audit do?

(Essay)

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Question 58

The advantages of the payback approach include all of the following EXCEPT it ____.

(Multiple Choice)

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Question 59

Consider a capital expenditure project that has forecasted revenues equal to $32,000 per year; cash expenses are estimated to be $29,000 per year. The cost of the project equipment is $23,000, and the equipment's estimated salvage value at the end of the project is $9,000. The equipment's $23,000 cost will be depreciated on a straight-line basis to $0 over a 10-year estimated economic life. Assume that the project requires an initial $7,000 working capital investment. The company's marginal tax rate is 30%. Calculate the project's net present value using a 12% discount rate.

(Multiple Choice)

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Question 60

Showing 41 - 60 of 103

Exam 12: Capital Budgeting: Decision Criteria and Real Option Considerations

____ options allow a firm to design into a project the capability of shifting the product mix of the project if demand or relative product prices dictate such a shift.

The objective in solving capital rationing problems is to ____.

What is the internal rate of return for a project that has a net investment of $14,600 and a single net cash flow of $25,750 in 5 years?

Based upon the following cash flows, should Chipper Nipper Cookie Company introduce a new product, Rolling In Dough Pies? The initial investment is $180,000, and the cost of capital is 11.5%. ? Years Cash Flows 1 \ 80,000 2 \ 95,000 3 \ 95,000 4 \ 110,000 5 \ 110,000 6 \ 110,000

If the net present value of an investment project is positive, then the ____.

What is the net present value of the following project if the required rate of return is 15%? The initial investment is $150,000. ? Years Cash Flows 1 \ 30,000 2 \ 80,000 3 \ 100,000 4 \ 200,000

In considering the payback method, ____.

What is the NPV of a project that required a net investment of $500,000 and produced net cash flows of $150,000 per year for 5 years and $110,000 for the next 5 years? Assume the cost of capital is 14%.

In the case of mutually exclusive projects, NPV and PI are likely to yield conflicting decisions when ____.

When evaluating international capital expenditure projects, the analyst may compute the present value of the net cash flows in the local currency and then ____.

The ____ of an investment is the period of time for the ____ to equal the initial cash outlay.

What is the internal rate of return for a project that has a net investment of $76,000 and net cash flows of $20,507 per year for 7 years?

An investment project requires a net investment of $100,000. The project is expected to generate annual net cash inflows of $28,000 for the next 5 years. The firm's cost of capital is 12%. Determine the internal rate of return for the project (to the nearest tenth of one percent).

Should the following project be accepted if the cost of capital is 12%? Initial Investment is $50,000. ? Years Cash Flows 1 \ 25,000 2 \ 35,000 3 \ 55,000

In the absence of capital rationing, the net present value method is normally superior to the ____ method when choosing among mutually exclusive investments. I. internal rate of return II. profitability index

In working with capital budgeting, what does a post-audit do?

The advantages of the payback approach include all of the following EXCEPT it ____.

The Role and Objective of Financial Management

The Domestic and International Financial Marketplace

Evaluation of Financial Performance

Financial Planning and Forecasting

The Time Value of Money

Continuous Compounding and Discounting

Fixed Income Securities: Characteristics and Valuation

Common Stock: Characteristics, Valuation, and Issuance

Analysis of Risk and Return

Capital Budgeting and Cash Flow Analysis

Mutually Exclusive Investments Having Unequal Lives

Capital Budgeting and Risk

The Cost of Capital

Capital Structure Concepts

Breakeven Analysis

Capital Structure Management in Practice

Dividend Policy

Working Capital Policy and Short-Term Financing

The Management of Cash and Marketable Securities

The Management of Accounts Receivable and Inventories

Lease and Intermediate Term Financing

Financing With Derivatives

Bond Refunding Analysis

Risk Management

International Financial Management

Corporate Restructuring

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The of an investment is the period of time for the to equal the initial cash outlay.