Exam 8: Net Present Value and Other Investment Criteria

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When you have to choose between projects with different lives, you should put them on an equal footing by computing the equivalent annual annuity or benefit of the two projects.

(True/False)

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Question 81

If two projects offer the same positive NPV, then they:

(Multiple Choice)

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Question 82

According to the NPV rule, all projects should be accepted if NPV is positive when discounted at the:

(Multiple Choice)

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Question 83

If the opportunity cost of capital for a lending project exceeds the project's IRR, then the project has a(n):

(Multiple Choice)

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Question 84

What is the NPV of a project that costs $100,000 and returns $50,000 annually for 3 years if the opportunity cost of capital is 14%?

(Multiple Choice)

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Question 85

If a project costs $72,000 and returns $18,500 per year for 5 years, what is its IRR?

(Multiple Choice)

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Question 86

What is the equivalent annual cost for a project that requires a $40,000 investment at time zero, and a $10,000 annual expense during each of the next 4 years, if the opportunity cost of capital is 10%?

(Multiple Choice)

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Question 87

Which of the following investment criteria takes the time value of money into consideration?

(Multiple Choice)

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Question 88

When a manager does not accept a positive-NPV project, shareholders face an opportunity cost in the amount of the:

(Multiple Choice)

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Question 89

When we compare assets with different lives, we should select the machine that has the lowest equivalent annual cost.

(True/False)

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Question 90

The opportunity cost of capital is equal to:

(Multiple Choice)

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Question 91

When will you be indifferent between two mutually exclusive projects of similar size?

(Multiple Choice)

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Question 92

A project with an IRR that is less than the opportunity cost of capital should be:

(Multiple Choice)

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Question 93

When a project's internal rate of return equals its opportunity cost of capital, then the:

(Multiple Choice)

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Question 94

The IRR is the rate of return on the cash flows of the investment, also known as the opportunity cost of capital.

(True/False)

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Question 95

A risky dollar is worth more than a safe one.

(True/False)

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Question 96

What is the net present value of an investment, and how do you calculate it?

(Essay)

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Question 97

When projects are mutually exclusive, selection should be made according to the project with the:

(Multiple Choice)

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Question 98

What is the maximum that should be invested in a project at time zero if the inflows are estimated at $50,000 annually for 3 years, and the cost of capital is 9%?

(Multiple Choice)

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Question 99

The decision rule for net present value is to:

(Multiple Choice)

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Question 100

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Exam 8: Net Present Value and Other Investment Criteria

When you have to choose between projects with different lives, you should put them on an equal footing by computing the equivalent annual annuity or benefit of the two projects.

If two projects offer the same positive NPV, then they:

According to the NPV rule, all projects should be accepted if NPV is positive when discounted at the:

If the opportunity cost of capital for a lending project exceeds the project's IRR, then the project has a(n):

What is the NPV of a project that costs $100,000 and returns $50,000 annually for 3 years if the opportunity cost of capital is 14%?

If a project costs $72,000 and returns $18,500 per year for 5 years, what is its IRR?

What is the equivalent annual cost for a project that requires a $40,000 investment at time zero, and a $10,000 annual expense during each of the next 4 years, if the opportunity cost of capital is 10%?

Which of the following investment criteria takes the time value of money into consideration?

When a manager does not accept a positive-NPV project, shareholders face an opportunity cost in the amount of the:

When we compare assets with different lives, we should select the machine that has the lowest equivalent annual cost.

The opportunity cost of capital is equal to:

When will you be indifferent between two mutually exclusive projects of similar size?

A project with an IRR that is less than the opportunity cost of capital should be:

When a project's internal rate of return equals its opportunity cost of capital, then the:

The IRR is the rate of return on the cash flows of the investment, also known as the opportunity cost of capital.

A risky dollar is worth more than a safe one.

What is the net present value of an investment, and how do you calculate it?

When projects are mutually exclusive, selection should be made according to the project with the:

What is the maximum that should be invested in a project at time zero if the inflows are estimated at $50,000 annually for 3 years, and the cost of capital is 9%?

The decision rule for net present value is to:

Goals and Governance of the Corporation

Financial Markets and Institutions

Accounting and Finance

Measuring Corporate Performance

The Time Value of Money

Valuing Bonds

Valuing Stocks

Using Discounted Cash-Flow Analysis to Make Investment Decisions

Project Analysis

Introduction to Risk, Return, and the Opportunity Cost of Capital

Risk, Return, and Capital Budgeting

The Weighted-Average Cost of Capital and Company Valuation

Introduction to Corporate Financing

How Corporations Raise Venture Capital and Issue Securities

Debt Policy

Payout Policy

Long-Term Financial Planning

Short-Term Financial Planning

Working Capital Management

Mergers, Acquisitions, and Corporate Control

International Financial Management

Options

Risk Management

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