Question 1

Which one of the following capital budgeting decision methods determines a project's annual percentage rate of return?

Accepted Answer

A) modified internal rate of return 
B) profitability index 
C) discounted payback period 
D) net present value 
A) modified internal rate of return 
B) profitability index 
C) discounted payback period 
D) net present value A

Question 2

A project's net present value is a measure of a project's contribution to firm value.

Accepted Answer

A) True 
 B)False  True

Question 3

Which of the following is true for 5-year project with a 3-year payback period?

Accepted Answer

A) The net present value is negative. 
B) The net present value is zero. 
C) The net present value is positive. 
D) Not enough information to determine anything about the project's net present value. 
A) The net present value is negative. 
B) The net present value is zero. 
C) The net present value is positive. 
D) Not enough information to determine anything about the project's net present value. D

Question 4

A capital budgeting project is expected to have the following cash flows: 
What is the project's internal rate of return?

Accepted Answer

A) 16.00% 
B) 8.99% 
C) 21.86% 
D) 15.54% 
A) 16.00% 
B) 8.99% 
C) 21.86% 
D) 15.54%

Question 5

What is the profitability index for an acceptable capital budgeting project?

Accepted Answer

A) greater than 1.0 
B) less than 1.0 
C) greater than 0.0 
D) less than 0.0 
A) greater than 1.0 
B) less than 1.0 
C) greater than 0.0 
D) less than 0.0

Question 6

A capital budgeting project's internal rate of return is the rate of return causing a project's net present value to equal the net investment.

Accepted Answer

A) True 
 B)False

Question 7

The net present value, profitability index, internal rate of return, and modified internal rate of return methods will provide consistent investment decisions for independent projects with normal cash flows.

Accepted Answer

A) True 
 B)False

Question 8

A capital budgeting project has a net investment of $550,000 and is expected to generate net cash flows of $200,000 annually for 7 years. What is the payback period?

Accepted Answer

A) 5.5 years 
B) 2.25 years 
C) 2.55 years 
D) 2.75 years 
A) 5.5 years 
B) 2.25 years 
C) 2.55 years 
D) 2.75 years

Question 9

The discounted payback period does not take into account the time value of money.

Accepted Answer

A) True 
 B)False

Question 10

A capital budgeting project is expected to have the following cash flows:  
What is the project's net present value at a 12% required rate of return?

Accepted Answer

A) $212,923 
B) $200,373 
C) $225,868 
D) $276,475 
A) $212,923 
B) $200,373 
C) $225,868 
D) $276,475

Question 11

If a project's internal rate of return is greater less)than the required rate of return, the project is generally acceptable unacceptable).

Accepted Answer

A) True 
 B)False

Question 12

A project's payback period is the amount of time required for the project's net cash flows to recover or pay back the net investment.

Accepted Answer

A) True 
 B)False

Question 13

A project's net present value is the sum of the future values of the net cash flows compounded at the required rate of return minus the net investment.

Accepted Answer

A) True 
 B)False

Question 14

The net present value is the ratio of a project's benefits to its costs and the profitability index is the difference between a project's benefits and its costs.

Accepted Answer

A) True 
 B)False

Question 15

A capital budgeting project has a net investment of $250,000 and is expected to generate net cash flows of $90,000 annually for 5 years. What is the profitability index at a 13% required rate of return?

Accepted Answer

A) 1.27 
B) 1.80 
C) 1.24 
D) 1.30 
A) 1.27 
B) 1.80 
C) 1.24 
D) 1.30

Question 16

Which of the following methods properly ranks projects' contribution to firm value when the projects have scale differences?

Accepted Answer

A) internal rate of return 
B) modified internal rate of return 
C) net present value 
D) profitability index 
A) internal rate of return 
B) modified internal rate of return 
C) net present value 
D) profitability index

Question 17

A capital budgeting project is expected to have the following cash flows:

What is the project's payback period?

Accepted Answer

A) 2.75 years 
B) 2.25 years 
C) 2.50 years 
D) 1.25 years 
A) 2.75 years 
B) 2.25 years 
C) 2.50 years 
D) 1.25 years

Question 18

A capital budgeting project has a net investment of $1,000,000 and is expected to generate net cash flows of $350,000 annually for 4 years. What is the internal rate of return?

Accepted Answer

A) 22.11% 
B) 14.96% 
C) 2.48% 
D) 26.43% 
A) 22.11% 
B) 14.96% 
C) 2.48% 
D) 26.43%

Question 19

A capital budgeting project is expected to have the following cash flows:

What is the project's internal rate of return?

Accepted Answer

A) 21.65% 
B) 30.88% 
C) 24.90% 
D) 27.95% 
A) 21.65% 
B) 30.88% 
C) 24.90% 
D) 27.95%

Question 20

The payback period is a useful measure of a project's

Accepted Answer

A) profitability. 
B) economic life. 
C) rate of return. 
D) liquidity risk. 
A) profitability. 
B) economic life. 
C) rate of return. 
D) liquidity risk.

Which one of the following capital budgeting decision methods determines a project's annual percentage rate of return?

A project's net present value is a measure of a project's contribution to firm value.

Which of the following is true for 5-year project with a 3-year payback period?

A capital budgeting project is expected to have the following cash flows: What is the project's internal rate of return?

What is the profitability index for an acceptable capital budgeting project?

A capital budgeting project's internal rate of return is the rate of return causing a project's net present value to equal the net investment.

The net present value, profitability index, internal rate of return, and modified internal rate of return methods will provide consistent investment decisions for independent projects with normal cash flows.

A capital budgeting project has a net investment of $550,000 and is expected to generate net cash flows of $200,000 annually for 7 years. What is the payback period?

The discounted payback period does not take into account the time value of money.

A capital budgeting project is expected to have the following cash flows: What is the project's net present value at a 12% required rate of return?

If a project's internal rate of return is greater less)than the required rate of return, the project is generally acceptable unacceptable).

A project's payback period is the amount of time required for the project's net cash flows to recover or pay back the net investment.

A project's net present value is the sum of the future values of the net cash flows compounded at the required rate of return minus the net investment.

The net present value is the ratio of a project's benefits to its costs and the profitability index is the difference between a project's benefits and its costs.

A capital budgeting project has a net investment of $250,000 and is expected to generate net cash flows of $90,000 annually for 5 years. What is the profitability index at a 13% required rate of return?

Which of the following methods properly ranks projects' contribution to firm value when the projects have scale differences?

A capital budgeting project is expected to have the following cash flows: What is the project's payback period?

A capital budgeting project has a net investment of $1,000,000 and is expected to generate net cash flows of $350,000 annually for 4 years. What is the internal rate of return?

A capital budgeting project is expected to have the following cash flows: What is the project's internal rate of return?

The payback period is a useful measure of a project's

Introduction

Financial Markets and Financial Instruments

Review of Financial Statements and Selected Ratios

The Relationship Between Risk and Return

Time Value of Money

Fixed Income Securities: Bonds and Preferred Stock

Common Stock

Cost of Capital

Introduction to Capital Budgeting and Cash Flow Estimation

An Introduction to Hotel Valuation

Capital Structure

Filters

Exam 10: Capital Budgeting Decision Methods

Which one of the following capital budgeting decision methods determines a project's annual percentage rate of return?

A project's net present value is a measure of a project's contribution to firm value.

Which of the following is true for 5-year project with a 3-year payback period?

A capital budgeting project is expected to have the following cash flows: What is the project's internal rate of return?

What is the profitability index for an acceptable capital budgeting project?

A capital budgeting project's internal rate of return is the rate of return causing a project's net present value to equal the net investment.

The net present value, profitability index, internal rate of return, and modified internal rate of return methods will provide consistent investment decisions for independent projects with normal cash flows.

A capital budgeting project has a net investment of $550,000 and is expected to generate net cash flows of $200,000 annually for 7 years. What is the payback period?

The discounted payback period does not take into account the time value of money.

A capital budgeting project is expected to have the following cash flows: What is the project's net present value at a 12% required rate of return?

If a project's internal rate of return is greater less)than the required rate of return, the project is generally acceptable unacceptable).

A project's payback period is the amount of time required for the project's net cash flows to recover or pay back the net investment.

A project's net present value is the sum of the future values of the net cash flows compounded at the required rate of return minus the net investment.

The net present value is the ratio of a project's benefits to its costs and the profitability index is the difference between a project's benefits and its costs.

A capital budgeting project has a net investment of $250,000 and is expected to generate net cash flows of $90,000 annually for 5 years. What is the profitability index at a 13% required rate of return?

Which of the following methods properly ranks projects' contribution to firm value when the projects have scale differences?

A capital budgeting project is expected to have the following cash flows: What is the project's payback period?

A capital budgeting project has a net investment of $1,000,000 and is expected to generate net cash flows of $350,000 annually for 4 years. What is the internal rate of return?

A capital budgeting project is expected to have the following cash flows: What is the project's internal rate of return?

The payback period is a useful measure of a project's

Introduction

Financial Markets and Financial Instruments

Review of Financial Statements and Selected Ratios

The Relationship Between Risk and Return

Time Value of Money

Fixed Income Securities: Bonds and Preferred Stock

Common Stock

Cost of Capital

Introduction to Capital Budgeting and Cash Flow Estimation

An Introduction to Hotel Valuation

Capital Structure

Filters