You are analyzing a project and have prepared the following data: $\begin{array} { | l | l | } \hline \text { Year } & \text { Cash Flow } \\ \hline 0 & £ £ 169,000 \\ \hline 1 & £ 46,200 \\ \hline 2 & £ 87,300 \\ \hline 3 & £ 41,000 \\ \hline 4 & £ 39,000 \\ \hline \end{array}$ Required payback period: 2.5 years Required AAR: 7.25% Required return: 8.50% Based on the payback period of _____for this project, you should _____ the project.

A) 1.87 years; accept B) 2.87 years; accept C) 2.87 years; reject D) 3.13 years; reject E) 3.87 years; reject A) 1.87 years; accept B) 2.87 years; accept C) 2.87 years; reject D) 3.13 years; reject E) 3.87 years; reject

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. $\begin{array}{l} \begin{array} { | l | l | l | } \hline \text { Year } & \text { Project A } & \text { Project B } \\ \hline 0 & £ 75,000 & £ 70,000 \\ \hline 1 & £ 19,000 & £ 10,000 \\ \hline 2 & £ 48,000 & £ 16,000 \\ \hline 3 & £ 12,000 & £ 72,000 \\ \hline \end{array}\\ \begin{array} { | l | l | l | } \hline & \text { Project A } & \text { Project B } \\ \hline \text { Required rate of return } & 10 \% & 13 \% \\ \hline \text { Required payback period } & 2.0 \text { years } & 2.0 \text { years } \\ \hline \text { Required accounting return } & 8 \% & 11 \% \\ \hline \end{array} \end{array}$ Based upon the average accounting return (AAR) and the information provided in the problem, you:

A) should accept both project A and project B. B) should accept project A because the AAR exceeds the required rate. C) should accept project A because the AAR is less than the required rate. D) should accept whichever project you prefer as they are equivalent from an AAR Perspective. E) cannot compute the AAR of either project. A) should accept both project A and project B. B) should accept project A because the AAR exceeds the required rate. C) should accept project A because the AAR is less than the required rate. D) should accept whichever project you prefer as they are equivalent from an AAR Perspective. E) cannot compute the AAR of either project.

\[\begin{array}{l} \text { What is the internal rate of return on an investment with the following cash flows? }\\ \begin{array} { | l | l | } \hline \text { Year } & \text { Cash Flow } \\ \hline 0 & - £ 123,400 \\ \hline 1 & £ 36,200 \\ \hline 2 & £ 54,800 \\ \hline 3 & £ 48,100 \\ \hline \end{array} \end{array}\]

A) 5.93% B) 5.96% C) 6.04% D) 6.09% E) 6.13% A) 5.93% B) 5.96% C) 6.04% D) 6.09% E) 6.13%

Exam 6: Net Present Value and Other Investment Rules

You are analyzing a project and have prepared the following data: Year Cash Flow 0 ££169,000 1 £46,200 2 £87,300 3 £41,000 4 £39,000 Required payback period: 2.5 years Required AAR: 7.25% Required return: 8.50% Based on the payback period of _for this project, you should _ the project.

(Multiple Choice)

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Question 81

A project has an initial cost of £8,500 and produces cash inﬂows of £2,600, £4,900,and £1,500 over the next three years, respectively.What is the discounted payback period if the required rate of Return is 7%?

(Multiple Choice)

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Question 82

The internal rate of return for a project will increase if:

(Multiple Choice)

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Question 83

The primary reason that company projects with positive net present values are considered acceptable is that:

(Multiple Choice)

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Question 84

Yancy is considering a project which will produce cash inﬂows of £900 a year for 4 years.The project has a 9% required rate of return and an initial cost of £2,800.What is the discounted Payback period?

(Multiple Choice)

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Question 85

The present value of an investment's future cash ﬂows divided by the initial cost of the investment is called the:

(Multiple Choice)

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Question 86

Larry's Lanterns is considering a project which will produce sales of £240,000 a year for the next ﬁve years.The proﬁt margin is estimated at 6% .The project will cost £290,000 and be depreciated Straight-line to a book value of zero over the life of the project.Larry's has a required accounting Return of 8%.This project should be _ because the AAR is _.

(Multiple Choice)

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Question 87

A mutually exclusive project is a project whose:

(Multiple Choice)

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Question 88

The length of time required for a project's discounted cash ﬂows to equal the initial cost of the project is called the:

(Multiple Choice)

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Question 89

A project has an initial cost of £38,000 and a four-year life.The company uses straight-line depreciation to a book value of zero over the life of the project.The projected net income from the Project is £1,000, £1,200, £1,500, and £1,700 a year for the next four years, respectively.What is the Average accounting return?

(Multiple Choice)

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Question 90

Which of the following statement is true?

(Multiple Choice)

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Question 91

The possibility that more than one discount rate will make the NPV of an investment equal to zero is called the _____ problem.

(Multiple Choice)

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Question 92

What is the profitability index for an investment with the following cash flows given a $9 \%$ required return? $What is the profitability index for an investment with the following cash flows given a 9 \% required return?$

(Multiple Choice)

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Question 93

You are considering two mutually exclusive projects with the following cash flows. Will your choice between the two projects differ if the required rate of return is $8 \%$ rather than $11 \%$ ? If so, what should you do? $You are considering two mutually exclusive projects with the following cash flows. Will your choice between the two projects differ if the required rate of return is 8 \% rather than 11 \% ? If so, what should you do?$

(Multiple Choice)

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Question 94

The proﬁtability index is the ratio of:

(Multiple Choice)

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Question 95

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. Year Project A Project B 0 £75,000 £70,000 1 £19,000 £10,000 2 £48,000 £16,000 3 £12,000 £72,000 Project A Project B Required rate of return 10\% 13\% Required payback period 2.0 years 2.0 years Required accounting return 8\% 11\% Based upon the average accounting return (AAR) and the information provided in the problem, you:

(Multiple Choice)

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Question 96

The investment decision rule that relates average net income to average investment is the:

(Multiple Choice)

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Question 97

What is the internal rate of return on an investment with the following cash flows? Year Cash Flow 0 -£123,400 1 £36,200 2 £54,800 3 £48,100

(Multiple Choice)

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Question 98

If a project is assigned a required rate of return equal to zero, then:

(Multiple Choice)

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Question 99

The shortcoming(s) of the average accounting return (AAR) method is (are):

(Multiple Choice)

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Question 100

Showing 81 - 100 of 110

Exam 6: Net Present Value and Other Investment Rules

A project has an initial cost of £8,500 and produces cash inﬂows of £2,600, £4,900,and £1,500 over the next three years, respectively.What is the discounted payback period if the required rate of Return is 7%?

The internal rate of return for a project will increase if:

The primary reason that company projects with positive net present values are considered acceptable is that:

Yancy is considering a project which will produce cash inﬂows of £900 a year for 4 years.The project has a 9% required rate of return and an initial cost of £2,800.What is the discounted Payback period?

The present value of an investment's future cash ﬂows divided by the initial cost of the investment is called the:

A mutually exclusive project is a project whose:

The length of time required for a project's discounted cash ﬂows to equal the initial cost of the project is called the:

Which of the following statement is true?

The possibility that more than one discount rate will make the NPV of an investment equal to zero is called the _____ problem.

What is the profitability index for an investment with the following cash flows given a 9%9 \%9% required return?

You are considering two mutually exclusive projects with the following cash flows. Will your choice between the two projects differ if the required rate of return is 8%8 \%8% rather than 11%11 \%11% ? If so, what should you do?

The proﬁtability index is the ratio of:

The investment decision rule that relates average net income to average investment is the:

What is the internal rate of return on an investment with the following cash flows? Year Cash Flow 0 -£123,400 1 £36,200 2 £54,800 3 £48,100

If a project is assigned a required rate of return equal to zero, then:

The shortcoming(s) of the average accounting return (AAR) method is (are):

Introduction to Corporate Finance

Corporate Governance

Financial Statement Analysis

Discounted Cash Flow Valuation

Bond, Equity and Firm Valuation

Making Capital Investment Decisions

Risk Analysis, Real Options and Capital Budgeting

Risk and Return: Lessons From Market History

Risk and Return: the Capital Asset Pricing Model

Factor Models and the Arbitrage Pricing Theory

Risk, Cost of Capital and Capital Budgeting

Efficient Capital Markets and Behavioural Finance

Long-Term Financing: an Introduction

Capital Structure: Basic Concepts

Capital Structure: Limits to the Use of Debt

Valuation and Capital Budgeting for the Levered Firm

Dividends and Other Payouts

Equity Financing

Debt Financing

Leasing

Options and Corporate Finance

Options and Corporate Finance: Extensions and Applications

Warrants and Convertibles

Financial Risk Management With Derivatives

Short-Term Finance and Planning

Short-Term Capital Management

Mergers and Acquisitions

Financial Distress

International Corporate Finance

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What is the profitability index for an investment with the following cash flows given a $9 \%$ required return? $What is the profitability index for an investment with the following cash flows given a 9 \% required return?$