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

Compute the discounted 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 12 percent and the maximum allowable discounted payback is three years. Time: 0 1 2 3 4 5 Cash flow: -5000 500 2000 3000 1500 500

A project's IRR:

Rate-based statistics represent summary cash flows, and these summaries tend to lose which two important details?

Which of these is a capital budgeting technique that generates decision rules and associated metrics for choosing projects based upon the implicit expected geometric average of a project's rate of return?

A financial asset will pay you $50,000 at the end of 20 years if you pay premiums of $975 per year at the end of each year for 20 years. What is the IRR of this financial asset?

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 8 percent, and the maximum allowable payback and discounted payback statistic for the projects are two and three years, respectively. Time 0 1 2 3 Project A Cash Flow -20,000 10,000 30,000 1,000 Project B Cash Flow -30,000 10,000 20,000 50,000 Use the MIRR decision rule to evaluate these projects; which one(s) should be accepted or rejected?

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?

Which of the following statements is correct?

Which of the following statements is correct?

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

The MIRR statistic is different from the IRR statistic in that:

All capital budgeting techniques: