Question 1

A disadvantage of the payback statistic is that:

Accepted Answer

A) it does not reflect the time value of money. 
B) it does not give an indication of the project's riskiness. 
C) it does not consider cash flows beyond the payback period. 
D) All of these are disadvantages of payback. 
A) it does not reflect the time value of money. 
B) it does not give an indication of the project's riskiness. 
C) it does not consider cash flows beyond the payback period. 
D) All of these are disadvantages of payback.

Question 2

Contrast the use of the internal rate of return (IRR)versus the modified internal rate of return (MIRR)methods for evaluating capital investment opportunities.

Accepted Answer

Unfortunately,the basic IRR statistic be

Question 3

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 four and a half years,respectively.Use the payback decision to evaluate this project; should it be accepted or rejected?

Accepted Answer

A) Payback = 4.44 years; reject 
B) Payback = 3.44 years; accept 
C) Payback = 3.54 years; reject 
D) Payback = 3.24 years; reject 
A) Payback = 4.44 years; reject 
B) Payback = 3.44 years; accept 
C) Payback = 3.54 years; reject 
D) Payback = 3.24 years; reject

Question 4

When choosing between two mutually exclusive projects using the payback period method for evaluating capital projects,one would choose:

Accepted Answer

A) either project if they both are more than managers' maximum payback period. 
B) neither project if they both are less than managers' maximum payback period. 
C) the project that pays back the soonest. 
D) the project that pays back the soonest if it is equal to or less than managers' maximum payback period. 
A) either project if they both are more than managers' maximum payback period. 
B) neither project if they both are less than managers' maximum payback period. 
C) the project that pays back the soonest. 
D) the project that pays back the soonest if it is equal to or less than managers' maximum payback period.

Question 5

A decision rule and associated methodology for converting the NPV statistic into a rate-based metric is referred to as:

Accepted Answer

A) NPV. 
B) profitability index. 
C) MIRR. 
D) discounted payback. 
A) NPV. 
B) profitability index. 
C) MIRR. 
D) discounted payback.

Question 6

All of the following are strengths of NPV EXCEPT:

Accepted Answer

A) it works equally well for independent and mutually exclusive projects. 
B) managers have a preference for using a statistic that is in percent instead of dollars. 
C) it uses a conservative reinvestment rate assumption. 
D) these are all strengths of the NPV statistic. 
A) it works equally well for independent and mutually exclusive projects. 
B) managers have a preference for using a statistic that is in percent instead of dollars. 
C) it uses a conservative reinvestment rate assumption. 
D) these are all strengths of the NPV statistic.

Question 7

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.
Use the payback decision rule to evaluate these projects; which one(s)should be accepted or rejected?

Accepted Answer

A) Accept both A and B 
B) Accept neither A nor B 
C) Accept A, reject B 
D) Reject A, accept B 
A) Accept both A and B 
B) Accept neither A nor B 
C) Accept A, reject B 
D) Reject A, accept B

A disadvantage of the payback statistic is that:

Contrast the use of the internal rate of return (IRR)versus the modified internal rate of return (MIRR)methods for evaluating capital investment opportunities.

When choosing between two mutually exclusive projects using the payback period method for evaluating capital projects,one would choose:

A decision rule and associated methodology for converting the NPV statistic into a rate-based metric is referred to as:

All of the following are strengths of NPV EXCEPT:

Introduction to Financial Management

Reviewing Financial Statements

Analyzing Financial Statements

Time Value of Money

Time Value of Money

Valuing Bonds

Valuing Stockspart

Characterizing Risk and Return

Estimating Risk and Return

Calculating the Cost of Capital

Estimating Cash Flows on Capital Budgeting Projects

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

A disadvantage of the payback statistic is that:

Contrast the use of the internal rate of return (IRR)versus the modified internal rate of return (MIRR)methods for evaluating capital investment opportunities.

When choosing between two mutually exclusive projects using the payback period method for evaluating capital projects,one would choose:

A decision rule and associated methodology for converting the NPV statistic into a rate-based metric is referred to as:

All of the following are strengths of NPV EXCEPT:

Introduction to Financial Management

Reviewing Financial Statements

Analyzing Financial Statements

Time Value of Money

Time Value of Money

Valuing Bonds

Valuing Stockspart

Characterizing Risk and Return

Estimating Risk and Return

Calculating the Cost of Capital

Estimating Cash Flows on Capital Budgeting Projects

Working Capital 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

Filters