Compute the NPV statistic for Project Y given the following cash flows if the appropriate cost of capital is 10 percent. \[\begin{array} { l c c c c c } \text { Time } & 0 & 1 & 2 & 3 & 4 \\ \hline \text { Cash Flow } & \$ 8,000 & \$ 3,350 & \$ 4,180 & \$ 1,520 & \$ 2,000 \end{array}\]

A) $894.37 B) $993.97 C) $964.72 D) $1,008.03 A) $894.37 B) $993.97 C) $964.72 D) $1,008.03

Compute the MIRR for Project Y and accept or reject the project with the cash flows shown as follows if the appropriate cost of capital is 12 percent. \[\begin{array} { | l | c | c | c | c | c | c | } \hline \text { Time: } & 0 & 1 & 2 & 3 & 4 & 5 \\ \hline \text { Cash flow: } & - 5,000 & 1,000 & 1,000 & 0 & 2,000 & 2,000 \\ \hline \end{array}\]

A) 7.62 percent, accept B) 7.62 percent, reject C) 47.09 percent, accept D) 47.09 percent, reject A) 7.62 percent, accept B) 7.62 percent, reject C) 47.09 percent, accept D) 47.09 percent, reject

Exam 13: Weighing Net Present Value and Other Capital Budgeting Criteria

Suppose your firm is considering investing in a project with the cash flows shown as follows, that the required rate of return on projects of this risk class is 10 percent, and that the maximum allowable payback and discounted payback statistics for the project are three and a half and four and a half years, respectively. Use the discounted payback decision to evaluate this project; should it be accepted or rejected? Time 0 1 2 3 4 5 6 Cash Flow -\ 5,000 \ 1,200 \ 1,400 \ 1,600 \ 1,600 \ 1,100 \ 2,000

(Multiple Choice)

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Question 21

Under what conditions can a rate-based statistic yield a different accept/reject decision than NPV?

(Multiple Choice)

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Question 22

Compute the NPV statistic for Project Y given the following cash flows if the appropriate cost of capital is 10 percent. Time 0 1 2 3 4 Cash Flow \ 8,000 \ 3,350 \ 4,180 \ 1,520 \ 2,000

(Multiple Choice)

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Question 23

Suppose your firm is considering investing in a project with the cash flows shown as follows, that the required rate of return on projects of this risk class is 8 percent, and that the maximum allowable payback and discounted payback statistics for the project are three and a half and four and a half years, respectively. Use the PI decision to evaluate this project; should it be accepted or rejected? Time 0 1 2 3 4 5 6 Cash Flow -\ 5,000 \ 1,200 \ 1,400 \ 1,600 \ 1,600 \ 1,100 \ 2,000

(Multiple Choice)

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Question 24

Suppose your firm is considering two mutually exclusive, required projects with the cash flows shown as follows. The required rate of return on projects of both of their risk class is 10 percent, and the maximum allowable payback and discounted payback statistic for the projects are two and a half and three and a half years, respectively. Time 0 1 2 3 Project A Cash Flow -1,000 300 400 700 Project B Cash Flow -500 200 400 300

(Multiple Choice)

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Question 25

Which of the following is a technique for evaluating capital projects that tells how long it will take a firm to earn back the money invested in a project plus interest at market rates?

(Multiple Choice)

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Question 26

Compute the payback statistic for Project Y and recommend whether the firm should accept or reject the project with the cash flows shown as follows if the appropriate cost of capital is 11 percent and the maximum allowable payback is one year. Time: 0 1 2 3 4 5 Cash flow: -100 75 100 300 75 200

(Multiple Choice)

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Question 27

The least-used capital budgeting technique in industry is:

(Multiple Choice)

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Question 28

Neither payback period nor discounted payback period techniques for evaluating capital projects account for:

(Multiple Choice)

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Question 29

Which of the following statements is correct?

(Multiple Choice)

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Question 30

Suppose your firm is considering investing in a project with the cash flows shown as follows, that the required rate of return on projects of this risk class is 12 percent, and that the maximum allowable payback and discounted payback statistic for the project are two and two and a half years, respectively. Time 0 1 2 3 4 5 Cash Flow -125,000 65,000 78,000 105,000 105,000 25,000

(Multiple Choice)

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Question 31

Suppose your firm is considering investing in a project with the cash flows shown as follows, that the required rate of return on projects of this risk class is 8 percent, and that the maximum allowable payback and discounted payback statistic for the project are three and three and a half years, respectively. Time 0 1 2 3 4 5 Cash Flow -100,000 30,000 45,000 55,000 30,000 10,000

(Multiple Choice)

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Question 32

Suppose your firm is considering investing in a project with the cash flows shown as follows, that the required rate of return on projects of this risk class is 12 percent, and that the maximum allowable payback and discounted payback statistic for the project are two and two and a half years, respectively. Time 0 1 2 3 4 Cash Flow -125,000 65,000 78,000 105,000 105,000 25,000

(Multiple Choice)

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Question 33

Suppose your firm is considering investing in a project with the cash flows shown as follows, that the required rate of return on projects of this risk class is 8 percent, and that the maximum allowable payback and discounted payback statistics for the project are three and a half and four and a half years, respectively. Use the MIRR decision to evaluate this project; should it be accepted or rejected? Time 0 1 2 3 4 5 6 Cash Flow -\ 5,000 \ 1,200 \ 1,400 \ 1,600 \ 1,600 \ 1,100 \ 2,000

(Multiple Choice)

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Question 34

Compute the MIRR for Project Y and accept or reject the project with the cash flows shown as follows if the appropriate cost of capital is 12 percent. Time: 0 1 2 3 4 5 Cash flow: -5,000 1,000 1,000 0 2,000 2,000

(Multiple Choice)

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Question 35

Suppose your firm is considering investing in a project with the cash flows shown as follows, that the required rate of return on projects of this risk class is 10 percent, and that the maximum allowable payback and discounted payback statistics for the project are three and a half and four and a half years, respectively. Use the IRR decision to evaluate this project; should it be accepted or rejected? Time 0 1 2 3 4 5 6 Cash Flow -\ 85,000 \ 12,000 \ 11,000 \ 13,000 \ 21,000 \ 31,000 \ 32,000

(Multiple Choice)

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Question 36

Compute the NPV for Project X and accept or reject the project with the cash flows shown as follows if the appropriate cost of capital is 10 percent. Time: Time: 0 1 2 3 4 5 Cash flow: -75 -75 0 100 75 50

(Multiple Choice)

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Question 37

Which of these are sets of cash flows where all the initial cash flows are negative and all the subsequent ones are either zero or positive?

(Multiple Choice)

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Question 38

Suppose you have a project whose discounted payback is equal to its termination date. What can you say for sure about its PI?

(Multiple Choice)

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Question 39

All of the following capital budgeting tools are suitable for non-normal cash flows EXCEPT:

(Multiple Choice)

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Question 40

Under what conditions can a rate-based statistic yield a different accept/reject decision than NPV?

Compute the NPV statistic for Project Y given the following cash flows if the appropriate cost of capital is 10 percent. Time 0 1 2 3 4 Cash Flow \ 8,000 \ 3,350 \ 4,180 \ 1,520 \ 2,000

Which of the following is a technique for evaluating capital projects that tells how long it will take a firm to earn back the money invested in a project plus interest at market rates?

Compute the payback statistic for Project Y and recommend whether the firm should accept or reject the project with the cash flows shown as follows if the appropriate cost of capital is 11 percent and the maximum allowable payback is one year. Time: 0 1 2 3 4 5 Cash flow: -100 75 100 300 75 200

The least-used capital budgeting technique in industry is:

Neither payback period nor discounted payback period techniques for evaluating capital projects account for:

Which of the following statements is correct?

Compute the MIRR for Project Y and accept or reject the project with the cash flows shown as follows if the appropriate cost of capital is 12 percent. Time: 0 1 2 3 4 5 Cash flow: -5,000 1,000 1,000 0 2,000 2,000

Compute the NPV for Project X and accept or reject the project with the cash flows shown as follows if the appropriate cost of capital is 10 percent. Time: Time: 0 1 2 3 4 5 Cash flow: -75 -75 0 100 75 50

Which of these are sets of cash flows where all the initial cash flows are negative and all the subsequent ones are either zero or positive?

Suppose you have a project whose discounted payback is equal to its termination date. What can you say for sure about its PI?

All of the following capital budgeting tools are suitable for non-normal cash flows EXCEPT:

Introduction to Financial Management

Reviewing Financial Statements

Analyzing Financial Statements

Time Value of Money 1: Analyzing Single Cash Flows

Time Value of Money 2: Analyzing Annuity Cash Flows

Understanding Financial Markets and Institutions

Valuing Bonds

Valuing Stocks

Characterizing Risk and Return

Estimating Risk and Return

Calculating the Cost of Capital

Estimating Cash Flows on Capital Budgeting Projects

Working Capital Management and Policies

Financial Planning and Forecasting

Assessing Long-Term Debt, Equity, and Capital Structure

Sharing Firm Wealth: Dividends, Share Repurchases, and Other Payouts

Issuing Capital and the Investment Banking Process

International Corporate Finance

Mergers and Acquisitions and Financial Distress

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