Question 1

You are analyzing a project and have gathered the following data:   Based on the net present value of _____,you should _____ the project.

Accepted Answer

A) -$2,030.75; reject 
B) -$1,995.84; reject 
C) -$283.60; accept 
D) $3,283.60; accept 
E) $4,109.37; accept 
A) -$2,030.75; reject 
B) -$1,995.84; reject 
C) -$283.60; accept 
D) $3,283.60; accept 
E) $4,109.37; accept

Question 2

Which one of the following statements related to the internal rate of return (IRR)is correct?

Accepted Answer

A) The IRR yields the same accept and reject decisions as the net present value method given mutually exclusive projects. 
B) A project with an IRR equal to the required return would reduce the value of a firm if accepted. 
C) The IRR is equal to the required return when the net present value is equal to zero. 
D) Financing type projects should be accepted if the IRR exceeds the required return. 
E) The average accounting return is a better method of analysis than the IRR from a financial point of view. 
A) The IRR yields the same accept and reject decisions as the net present value method given mutually exclusive projects. 
B) A project with an IRR equal to the required return would reduce the value of a firm if accepted. 
C) The IRR is equal to the required return when the net present value is equal to zero. 
D) Financing type projects should be accepted if the IRR exceeds the required return. 
E) The average accounting return is a better method of analysis than the IRR from a financial point of view.

Question 3

You are considering the following two mutually exclusive projects.Both projects will be depreciated using straight-line depreciation to a zero book value over the life of the project.Neither project has any salvage value.   Should you accept or reject these projects based on net present value analysis?

Accepted Answer

A) accept Project A and reject Project B 
B) reject Project A and accept Project B 
C) accept both Projects A and B 
D) reject both Projects A and B 
E) You cannot make this decision based on net present value analysis. 
A) accept Project A and reject Project B 
B) reject Project A and accept Project B 
C) accept both Projects A and B 
D) reject both Projects A and B 
E) You cannot make this decision based on net present value analysis.

Question 4

Which one of the following methods of project analysis is defined as computing the value of a project based upon the present value of the project's anticipated cash flows?

Accepted Answer

A) constant dividend growth model 
B) discounted cash flow valuation 
C) average accounting return 
D) expected earnings model 
E) internal rate of return 
A) constant dividend growth model 
B) discounted cash flow valuation 
C) average accounting return 
D) expected earnings model 
E) internal rate of return

Question 5

Which of the following statements generally apply to the cash flows of a financing type project?
I.nonconventional cash flows
II.cash outflows exceed cash inflows prior to any time value adjustments
III.cash for services rendered is received prior to the cash that is spent providing the services
IV.the total of all cash flows must equal zero on an unadjusted basis

Accepted Answer

A) I only 
B) I and III only 
C) II and IV only 
D) I, II, and III only 
E) I, II, III, and IV 
A) I only 
B) I and III only 
C) II and IV only 
D) I, II, and III only 
E) I, II, III, and IV

Question 6

Explain how the internal rate of return (IRR)decision rule is applied to projects with financing type cash flows.

Accepted Answer

For financing type projects,the decision

Question 7

Mutually exclusive projects are best defined as competing projects which:

Accepted Answer

A) would commence on the same day. 
B) have the same initial start-up costs. 
C) both require the total use of the same limited resource. 
D) both have negative cash outflows at time zero. 
E) have the same life span. 
A) would commence on the same day. 
B) have the same initial start-up costs. 
C) both require the total use of the same limited resource. 
D) both have negative cash outflows at time zero. 
E) have the same life span.

Question 8

Which one of the following correctly applies to the average accounting rate of return?

Accepted Answer

A) It considers the time value of money. 
B) It measures net income as a percentage of the sales generated by a project. 
C) It is the best method of analyzing mutually exclusive projects from a financial point of view. 
D) It is the primary methodology used in analyzing independent projects. 
E) It can be compared to the return on assets ratio. 
A) It considers the time value of money. 
B) It measures net income as a percentage of the sales generated by a project. 
C) It is the best method of analyzing mutually exclusive projects from a financial point of view. 
D) It is the primary methodology used in analyzing independent projects. 
E) It can be compared to the return on assets ratio.

Question 9

An investment has the following cash flows and a required return of 13 percent.Based on IRR,should this project be accepted? Why or why not?

Accepted Answer

A) No; The IRR exceeds the required return by about 0.06 percent. 
B) No; The IRR is less than the required return by about 1.53 percent. 
C) Yes; The IRR exceeds the required return by about 0.06 percent. 
D) Yes; The IRR exceeds the required return by about 1.53 percent. 
E) Yes; The IRR is less than the required return by about 0.06 percent. 
A) No; The IRR exceeds the required return by about 0.06 percent. 
B) No; The IRR is less than the required return by about 1.53 percent. 
C) Yes; The IRR exceeds the required return by about 0.06 percent. 
D) Yes; The IRR exceeds the required return by about 1.53 percent. 
E) Yes; The IRR is less than the required return by about 0.06 percent.

Question 10

Day Interiors is considering a project with the following cash flows.What is the IRR of this project?

Accepted Answer

A) 6.42 percent 
B) 7.03 percent 
C) 7.48 percent 
D) 8.22 percent 
E) 8.56 percent 
A) 6.42 percent 
B) 7.03 percent 
C) 7.48 percent 
D) 8.22 percent 
E) 8.56 percent

Question 11

Colin is analyzing a project and has gathered the following data.Based on this data,what is the average accounting rate of return? The project's assets will be depreciated using straight-line depreciation to a zero book value over the life of the project.

Accepted Answer

A) 6.94 percent 
B) 13.88 percent 
C) 15.66 percent 
D) 27.75 percent 
E) 31.31 percent 
A) 6.94 percent 
B) 13.88 percent 
C) 15.66 percent 
D) 27.75 percent 
E) 31.31 percent

Question 12

What is the net present value of a project with the following cash flows if the required rate of return is 9 percent?

Accepted Answer

A) -$1,574.41 
B) -$1,208.19 
C) $5,904.65 
D) $6,029.09 
E) $6,311.16 
A) -$1,574.41 
B) -$1,208.19 
C) $5,904.65 
D) $6,029.09 
E) $6,311.16

Question 13

Cool Water Drinks is considering a proposed project with the following cash flows.Should this project be accepted based on the combined approach to the modified internal rate of return if both the discount rate and the reinvestment rate are 12.6 percent? Why or why not?

Accepted Answer

A) Yes; The MIRR is 8.81 percent. 
B) Yes; The MIRR is 9.23 percent. 
C) No; The MIRR is 8.81 percent. 
D) No; The MIRR is 9.06 percent. 
E) No; The MIRR is 9.23 percent. 
A) Yes; The MIRR is 8.81 percent. 
B) Yes; The MIRR is 9.23 percent. 
C) No; The MIRR is 8.81 percent. 
D) No; The MIRR is 9.06 percent. 
E) No; The MIRR is 9.23 percent.

Question 14

You are considering two independent projects with the following cash flows.The required return for both projects is 16 percent.Given this information,which one of the following statements is correct?

Accepted Answer

A) You should accept Project A and reject Project B based on their respective NPVs. 
B) You should accept Project B and reject Project A based on their respective NPVs. 
C) You should accept Project A and reject Project B based on their respective IRRs. 
D) You should accept Project B and reject Project A based on their respective IRRs. 
E) You should accept both projects based on both the NPV and IRR decision rules. 
A) You should accept Project A and reject Project B based on their respective NPVs. 
B) You should accept Project B and reject Project A based on their respective NPVs. 
C) You should accept Project A and reject Project B based on their respective IRRs. 
D) You should accept Project B and reject Project A based on their respective IRRs. 
E) You should accept both projects based on both the NPV and IRR decision rules.

Question 15

Net present value:

Accepted Answer

A) is the best method of analyzing mutually exclusive projects. 
B) is less useful than the internal rate of return when comparing different sized projects. 
C) is the easiest method of evaluation for non-financial managers to use. 
D) is less useful than the profitability index when comparing mutually exclusive projects. 
E) is very similar in its methodology to the average accounting return. 
A) is the best method of analyzing mutually exclusive projects. 
B) is less useful than the internal rate of return when comparing different sized projects. 
C) is the easiest method of evaluation for non-financial managers to use. 
D) is less useful than the profitability index when comparing mutually exclusive projects. 
E) is very similar in its methodology to the average accounting return.

You are analyzing a project and have gathered the following data: Based on the net present value of _,you should _ the project.

Which one of the following statements related to the internal rate of return (IRR)is correct?

Which one of the following methods of project analysis is defined as computing the value of a project based upon the present value of the project's anticipated cash flows?

Explain how the internal rate of return (IRR)decision rule is applied to projects with financing type cash flows.

Mutually exclusive projects are best defined as competing projects which:

Which one of the following correctly applies to the average accounting rate of return?

An investment has the following cash flows and a required return of 13 percent.Based on IRR,should this project be accepted? Why or why not?

Day Interiors is considering a project with the following cash flows.What is the IRR of this project?

Colin is analyzing a project and has gathered the following data.Based on this data,what is the average accounting rate of return? The project's assets will be depreciated using straight-line depreciation to a zero book value over the life of the project.

What is the net present value of a project with the following cash flows if the required rate of return is 9 percent?

Cool Water Drinks is considering a proposed project with the following cash flows.Should this project be accepted based on the combined approach to the modified internal rate of return if both the discount rate and the reinvestment rate are 12.6 percent? Why or why not?

You are considering two independent projects with the following cash flows.The required return for both projects is 16 percent.Given this information,which one of the following statements is correct?

Net present value:

Introduction to Corporate Finance

Financial Statements, Taxes, and Cash Flow

Working With Financial Statements

Long-Term Financial Planning and Growth

Introduction to Valuation: The Time Value of Money

Discounted Cash Flow Valuation

Interest Rates and Bond Valuation

Stock Valuation

Making Capital Investment Decisions

Project Analysis and Evaluation

Some Lessons From Capital Market History

Return, Risk, and the Security Market Line

Cost of Capital

Raising Capital

Financial Leverage and Capital Structure Policy

Dividends and Payout Policy

Short-Term Finance and Planning

Cash and Liquidity Management

Credit and Inventory Management

International Corporate Finance

Behavioral Finance: Implications for Financial Management

Enterprise Risk Management

Options and Corporate Finance

Option Valuation

Mergers and Acquisitions

Leasing

Filters

Exam 9: Net Present Value and Other Investment Criteria

You are analyzing a project and have gathered the following data: Based on the net present value of _____,you should _____ the project.

Which one of the following statements related to the internal rate of return (IRR)is correct?

Which one of the following methods of project analysis is defined as computing the value of a project based upon the present value of the project's anticipated cash flows?

Explain how the internal rate of return (IRR)decision rule is applied to projects with financing type cash flows.

Mutually exclusive projects are best defined as competing projects which:

Which one of the following correctly applies to the average accounting rate of return?

An investment has the following cash flows and a required return of 13 percent.Based on IRR,should this project be accepted? Why or why not?

Day Interiors is considering a project with the following cash flows.What is the IRR of this project?

Colin is analyzing a project and has gathered the following data.Based on this data,what is the average accounting rate of return? The project's assets will be depreciated using straight-line depreciation to a zero book value over the life of the project.

What is the net present value of a project with the following cash flows if the required rate of return is 9 percent?

Cool Water Drinks is considering a proposed project with the following cash flows.Should this project be accepted based on the combined approach to the modified internal rate of return if both the discount rate and the reinvestment rate are 12.6 percent? Why or why not?

You are considering two independent projects with the following cash flows.The required return for both projects is 16 percent.Given this information,which one of the following statements is correct?

Net present value:

Introduction to Corporate Finance

Financial Statements, Taxes, and Cash Flow

Working With Financial Statements

Long-Term Financial Planning and Growth

Introduction to Valuation: The Time Value of Money

Discounted Cash Flow Valuation

Interest Rates and Bond Valuation

Stock Valuation

Making Capital Investment Decisions

Project Analysis and Evaluation

Some Lessons From Capital Market History

Return, Risk, and the Security Market Line

Cost of Capital

Raising Capital

Financial Leverage and Capital Structure Policy

Dividends and Payout Policy

Short-Term Finance and Planning

Cash and Liquidity Management

Credit and Inventory Management

International Corporate Finance

Behavioral Finance: Implications for Financial Management

Enterprise Risk Management

Options and Corporate Finance

Option Valuation

Mergers and Acquisitions

Leasing

Filters

You are analyzing a project and have gathered the following data: Based on the net present value of _,you should _ the project.