Exam 9: Net Present Value and Other Investment Criteria

A project has cash flows of -$152,000, $60,800, $62,300 and $75,000 for Years 0 to 3, respectively. The required rate of return is 13 percent. What is the profitability index? Should you accept or reject the project based on this index value?

The IRR that causes the net present value of the differences between two project's cash flows to equal zero is called the: 

Applying the discounted payback decision rule to all projects may cause: 

Projects A and B are mutually exclusive and have an initial cost of $82,000 each. Project A provides cash inflows of $34,000 a year for three years while Project B produces a cash inflow of $115,000 in Year 3. Which project(s) should be accepted if the discount rate is 11.7 percent? What if the discount rate is 13.5 percent?

A project has an initial cost of $18,400 and expected cash inflows of $7,200, $8,900, and $7,500 over Years 1 to 3, respectively. What is the discounted payback period if the required rate of return is 11.2 percent?

You are comparing two mutually exclusive projects. The crossover point is 12.3 percent. You have determined that you should accept project A if the required return is 13.1 percent. This implies you should: 

An investment project provides cash flows of $1,562 per year for 10 years. If the initial cost is $8,720, what is the payback period?

 There are two distinct discount rates at which a particular project will have a zero net present value. In this situation, the project is said to: 

Mutually exclusive projects are best defined as competing projects that: 

An investment costs $152,000 and has projected cash inflows of $71,800, $86,900, and -$11,200 for Years 1 to 3, respectively. If the required rate of return is 15.5 percent, should you accept the investment based solely on the internal rate of return rule? Why or why not?

A proposed project has an initial cost of $38,000 and cash inflows of $12,300, $24,200, and $16,100 for Years 1 through 3, respectively. The required rate of return is 16.8 percent. Based on IRR, should this project be accepted? Why or why not?

A project's average net income divided by its average book value is referred to as the project's average: 

Swenson's is considering two mutually exclusive projects, Projects A and B, and has determined that the crossover rate for these projects is 11.7 percent. Given this you know that: 

A project has cash flows of -$108,000, $52,800, $53,200, and $83,100 for Years 0 to 3, respectively. The required payback period is two years. Based on the payback period of ________ years for this project, you should ________ the project.

Colin is analyzing a 3-year project that has an initial cost of $199,800. This cost will be depreciated straight-line to zero over three years. The projected annual net income for the three years is $11,600, $15,900, and $17,200. If the discount rate is 12 percent, what is the average accounting rate of return?

The length of time a firm must wait to recoup, in present value terms, the money it has invested in a project is referred to as the: 

A project has an initial cost of $31,300 and a three-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 $1,750, $2,100, and $1,700 a year for the next three years, respectively. What is the average accounting return?

The internal rate of return: 

A project has an initial cost of $6,900. The cash inflows are $850, $2,400, $3,100, and $4,100 over the next four years, respectively. What is the payback period?

Western Beef Exporters is considering a project that has an NPV of $32,600, an IRR of 15.1 percent, and a payback period of 3.2 years. The required return is 14.5 percent and the required payback period is 3.0 years. Which one of the following statements correctly applies to this project?