Exam 9: Net Present Value and Other Investment Criteria
Exam 1: Introduction to Corporate Finance262 Questions
Exam 2: Financial Statements, Taxes, and Cash Flow411 Questions
Exam 3: Working With Financial Statements414 Questions
Exam 4: Long-Term Financial Planning and Growth369 Questions
Exam 5: Introduction to Valuation: the Time Value of Money282 Questions
Exam 6: Discounted Cash Flow Valuation415 Questions
Exam 7: Interest Rates and Bond Valuation394 Questions
Exam 8: Stock Valuation401 Questions
Exam 9: Net Present Value and Other Investment Criteria409 Questions
Exam 10: Making Capital Investment Decisions365 Questions
Exam 11: Project Analysis and Evaluation428 Questions
Exam 12: Some Lessons From Capital Market History330 Questions
Exam 13: Return, Risk, and the Security Market Line417 Questions
Exam 14: Cost of Capital377 Questions
Exam 15: Raising Capital342 Questions
Exam 16: Financial Leverage and Capital Structure Policy385 Questions
Exam 17: Dividends and Payout Policy378 Questions
Exam 18: Short-Term Finance and Planning427 Questions
Exam 19: Cash and Liquidity Management378 Questions
Exam 20: Credit and Inventory Management384 Questions
Exam 21: International Corporate Finance372 Questions
Exam 22: Behavioral Finance: Implications for Financial Management269 Questions
Exam 23: Enterprise Risk Management336 Questions
Exam 24: Options and Corporate Finance308 Questions
Exam 25: Option Valuation449 Questions
Exam 26: Mergers and Acquisitions78 Questions
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You are comparing two mutually exclusive projects. The crossover point is 9 percent. You determine
that you should accept project A if the required return is 6 percent. This implies that you should
always accept project A and always reject project
(True/False)
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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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A project has average net income of $2,100 a year over its 4-year life. The initial cost of the project is $65,000 which will be depreciated using straight-line depreciation to a book value of zero over
The life of the project. The firm wants to earn a minimal average accounting return of 8.5 percent.
The firm should _____ the project based on the AAR of _____
(Multiple Choice)
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Martin is analyzing a project and has gathered the following data. Based on this data, what is the average accounting rate of return? The firm depreciates its assets using straight-line depreciation to
A zero book value over the life of the asset. 

(Multiple Choice)
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A project produces annual net income of $14,600, $18,700, and $23,500 over three years, respectively. The initial cost of the project is $310,800. This cost is depreciated straight-line to a
Zero book value over three years. What is the average accounting rate of return if the required
Discount rate is 9 percent?
(Multiple Choice)
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You are looking at an investment which has an initial cost of $400,000 and a salvage value of zero after five years. What is the average accounting return for this investment given the following
Annual net incomes: 

(Multiple Choice)
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You should accept Project _____ because it has the _____ average accounting return.
(Multiple Choice)
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The advantages of the payback method of project analysis include the application of a discount
rate to each separate cash flow.
(True/False)
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NPV and IRR can lead to different decisions in situations where the IRR is negative.
(True/False)
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A project has an initial cost of $61,000 and a 5-year life. The company uses straight-line depreciation to a zero book value over the life of the project. The projected net income from the
Project is $1,500, $1,600, $1,900, $2,100, and $2,200 a year for the next five years, respectively.
What is the average accounting rate of return?
(Multiple Choice)
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You are considering two mutually exclusive projects with the following cash flows. If the discount rate is 7.5 percent, you prefer Project _____ and if the discount rate is 12 percent, you prefer
Project _____. 

(Multiple Choice)
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Which one of the following statements is correct concerning the payback period?
(Multiple Choice)
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You are analyzing a project and have prepared the following data:
Based on the net present value of _____ for this project, you should _____ the project.

(Multiple Choice)
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Without using formulas, provide a definition of average accounting return (AAR).
(Essay)
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A project produces the following cash flows over the next five years: $600, $200, $350, $400 and $500, respectively. The initial cost of the project is $1,400. What is the internal rate of return on this
Project?
(Multiple Choice)
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What is the internal rate of return on an investment with the following cash flows? 

(Multiple Choice)
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Matthew's Construction is considering a project that will cost $1.2 million to start. The project is expected to produce cash flows starting in year 2 of $269,000 a year for the following six years.
What is the internal rate of return on this project?
(Multiple Choice)
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