What is the net present value of the following project if the required rate of return is 15%? The initial investment is $150,000 \[\begin{array} { | c | r | } \hline \text { Years } & \text { Cash Flaws } \\ \hline 1 & \mathbf { 3 0 , 0 0 0 } \\ \hline 2 & \$ 80,000 \\ \hline 3 & \$ 100,000 \\ \hline 4 & \$ 200,000 \\ \hline \end{array}\]

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 \[\begin{array} { | c | c | } \hline \text { Years } & \text { Cash Flars } \\ \hline 1 & \$ 25,000 \\ \hline 2 & \$ 35,000 \\ \hline 3 & \$ 55,000 \\ \hline \end{array}\]

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 10: Capital Budgeting: Decision Criteria and Real Option Considerations

Red Lake Mines, Inc.is considering adoption of a new project requiring a net investment of $10 million.The project is expected to generate 5 years of net cash inflows of $5 million per year.In the project's sixth, and final year, it is expected to have a net cash outflow of $1 million.What is the project's net present value, using a discount rate of 12 percent?

(Multiple Choice)

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Question 61

Which of the following investment decision rules (if any) assumes that the cash flows generated are reinvested over the life of the project at the firm's cost of capital?

(Multiple Choice)

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Question 62

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 Flaws 1 2 \ 80,000 3 \ 100,000 4 \ 200,000

(Multiple Choice)

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Question 63

There are various reasons why companies may have difficulty in earning a positive net present value.These reasons include barriers to market entry and other factors.List these factors.

(Essay)

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Question 64

Explain why the internal rate of return method is more popular than the net present value method.What are some potential problems with relying on the IRR method?

(Essay)

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Question 65

What is the internal rate of return for a project that has a net investment of $169,165 and net cash flows of $25,000 in the first year and 40,000 in years 2-7?

(Multiple Choice)

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Question 66

Which of the following would increase the net present value of a project?

(Multiple Choice)

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Question 67

Barnacle Bob's Fish and Tackle Shop is planning an expansion.The initial investment is $480,000 and anticipates cash inflows as listed below.The cost of capital is 12.2%.Based on the profitability index, should Barnacle Bob go ahead with the project? Years Cash Influm 1 190,000 2 105,000 3 105,000 4 195,000 5 195,000 0 195,000

(Multiple Choice)

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Question 68

Which of the following statements about comparing the techniques of net present value (npv) and internal rate of return (irr) is/are correct?

(Multiple Choice)

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Question 69

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

(Multiple Choice)

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Question 70

The objective in solving capital rationing problems is to:

(Multiple Choice)

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Question 71

What is the internal rate of return for a project that has a net investment of $150,000 and net cash flows of $40,000 for 5 years?

(Multiple Choice)

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Question 72

The profitability index would be if the present value of the net cash flows (NCF) over the life of a project were ____.

(Multiple Choice)

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Question 73

The approach takes into account both the magnitude and timing of cash flows over the entire life of a project in measuring its economic desirability.

(Multiple Choice)

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Question 74

What is the net present value of a project that has a net investment of $148,000 and net cash flows of $25,000 in the first year, $45,000 in years 2-7 and a negative net cash flow of $27,000 in year 8? Assume the cost of capital is 11 percent.

(Multiple Choice)

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Question 75

ZPS Models is considering a project that has a NINV of $564,000 and generates net cash flows of $105,000 per year for 10 years.What is the NPV of this project if ZPS has a cost of capital of 12.45%?

(Multiple Choice)

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Question 76

Which of the following is not a technique to handle the capital rationing problem?

(Multiple Choice)

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Question 77

Hydroponics is considering adding another greenhouse that would cost $95,000 and generate $20,000 in annual net cash flows over its 8 year expected life.The greenhouse would be depreciated on a straight-line basis to zero and the salvage value is also expected to be zero.If the firm has a marginal tax rate of 40 percent, what is this project's internal rate of return?

(Multiple Choice)

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Question 78

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 79

A weakness of the payback period is that it disregards:

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Question 80

Showing 61 - 80 of 107

Exam 10: Capital Budgeting: Decision Criteria and Real Option Considerations

Which of the following investment decision rules (if any) assumes that the cash flows generated are reinvested over the life of the project at the firm's cost of capital?

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 Flaws 1 2 \ 80,000 3 \ 100,000 4 \ 200,000

There are various reasons why companies may have difficulty in earning a positive net present value.These reasons include barriers to market entry and other factors.List these factors.

Explain why the internal rate of return method is more popular than the net present value method.What are some potential problems with relying on the IRR method?

What is the internal rate of return for a project that has a net investment of $169,165 and net cash flows of $25,000 in the first year and 40,000 in years 2-7?

Which of the following would increase the net present value of a project?

Which of the following statements about comparing the techniques of net present value (npv) and internal rate of return (irr) is/are correct?

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

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 $150,000 and net cash flows of $40,000 for 5 years?

The profitability index would be if the present value of the net cash flows (NCF) over the life of a project were ____.

The approach takes into account both the magnitude and timing of cash flows over the entire life of a project in measuring its economic desirability.

What is the net present value of a project that has a net investment of $148,000 and net cash flows of $25,000 in the first year, $45,000 in years 2-7 and a negative net cash flow of $27,000 in year 8? Assume the cost of capital is 11 percent.

ZPS Models is considering a project that has a NINV of $564,000 and generates net cash flows of $105,000 per year for 10 years.What is the NPV of this project if ZPS has a cost of capital of 12.45%?

Which of the following is not a technique to handle the capital rationing problem?

A weakness of the payback period is that it disregards:

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

A: The Time Value of Money

Fixed-Income Securities: Characteristics and Valuation

Common Stock: Characteristics, Valuation, and Issuance

Analysis of Risk and Return

Capital Budgeting and Cash Flow Analysis

A: Capital Budgeting: Decision Criteria and Real Option Considerations

Capital Budgeting and Risk

The Cost of Capital, Capital Structure, and Dividend Policy

Capital Structure Concepts

Capital Structure Management in Practice

A: Capital Structure Management in Practice

Dividend Policy

Working Capital Management

The Management of Cash and Marketable Securities

The Management of Accounts Receivable and Inventories

Lease and Intermediate-Term Financing

Financing with Derivatives

A: Financing with Derivatives

Risk Management

International Financial Management

Corporate Restructuring

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