Question 1

If a project has a cost of $50,000 and a profitability index of 0.4, then:

Accepted Answer

A) Its cash inflows are $70,000 
B) The present value of its cash inflows is $30,000 
C) Its IRR is 20 percent 
D) Its NPV is $20,000 
A) Its cash inflows are $70,000 
B) The present value of its cash inflows is $30,000 
C) Its IRR is 20 percent 
D) Its NPV is $20,000

Question 2

A project with an IRR that is less than the opportunity cost of capital should be:

Accepted Answer

A) Accepted for all project types 
B) Accepted for all lending projects 
C) Accepted for all borrowing projects 
D) Rejected for all projects 
A) Accepted for all project types 
B) Accepted for all lending projects 
C) Accepted for all borrowing projects 
D) Rejected for all projects

Question 3

Discuss three reasons why a firm may want to impose soft capital rationing.

Accepted Answer

Soft capital rationing is a constraint i

Question 4

The payback period considers all project cash flows.

Accepted Answer

A) True 
 B)False

Question 5

For mutually exclusive projects, the project with the higher IRR is the correct selection.

Accepted Answer

A) True 
 B)False

Question 6

When calculating a Project's payback period, cash flows are discounted at:

Accepted Answer

A) The opportunity cost of capital 
B) The internal rate of return 
C) The risk-free rate of return 
D) A discount rate of zero 
A) The opportunity cost of capital 
B) The internal rate of return 
C) The risk-free rate of return 
D) A discount rate of zero

Question 7

A risky dollar is worth more than a safe one.

Accepted Answer

A) True 
 B)False

Question 8

The acceptance of an investment project implies that: 1.Its IRR is greater than 15 percent
2)Its NPV is greater than its IRR
3)Its NPV is greater than 0

Accepted Answer

A) 1 
B) 2 
C) 3 
D) Both 2 and 3 
A) 1 
B) 2 
C) 3 
D) Both 2 and 3

Question 9

Which of the following can be deduced about a three-year investment project that has a two-year payback period?

Accepted Answer

A) The NPV is positive 
B) The IRR is greater than the cost of capital 
C) Both 'a' and 'b' can be deduced 
D) Neither 'a' nor 'b' can be deduced 
A) The NPV is positive 
B) The IRR is greater than the cost of capital 
C) Both 'a' and 'b' can be deduced 
D) Neither 'a' nor 'b' can be deduced

Question 10

What is the decision rule in the case of sign changes that produce multiple IRRs for a project?

Accepted Answer

A) Select the lowest IRR to be conservative 
B) Select the highest IRR to maximize the benefits 
C) Any or all of the IRRs are justified to use 
D) Evaluate the project according to NPV 
A) Select the lowest IRR to be conservative 
B) Select the highest IRR to maximize the benefits 
C) Any or all of the IRRs are justified to use 
D) Evaluate the project according to NPV

If a project has a cost of $50,000 and a profitability index of 0.4, then:

A project with an IRR that is less than the opportunity cost of capital should be:

Discuss three reasons why a firm may want to impose soft capital rationing.

The payback period considers all project cash flows.

For mutually exclusive projects, the project with the higher IRR is the correct selection.

When calculating a Project's payback period, cash flows are discounted at:

A risky dollar is worth more than a safe one.

The acceptance of an investment project implies that: 1.Its IRR is greater than 15 percent 2)Its NPV is greater than its IRR 3)Its NPV is greater than 0

Which of the following can be deduced about a three-year investment project that has a two-year payback period?

What is the decision rule in the case of sign changes that produce multiple IRRs for a project?

Goals and Governance of the Firm

Financial Markets and Institutions

Accounting and Finance

Measuring Corporate Performance

The Time Value of Money

Valuing Bonds

Valuing Stocks

Using Discounted Cash-Flow Analysis to Make Investment Decisions

Project Analysis

Introduction to Risk, Return, and the Opportunity Cost of Capital

Risk, Return, and Capital Budgeting

The Weighted-Average Cost of Capital and Company Valuation

Introduction to Corporate Financing and Governance

Venture Capital, Ipos, and Seasoned Offerings

Debt Policy

Payout Policy

Long-Term Financial Planning

Short-Term Financial Planning

Working Capital Management

Mergers, Acquisitions, and Corporate Control

International Financial Management

Options

Risk Management

Conclusion

What We Do and Do Not Know About Finance

Filters

Exam 8: Net Present Value and Other Investment Criteria

If a project has a cost of $50,000 and a profitability index of 0.4, then:

A project with an IRR that is less than the opportunity cost of capital should be:

Discuss three reasons why a firm may want to impose soft capital rationing.

The payback period considers all project cash flows.

For mutually exclusive projects, the project with the higher IRR is the correct selection.

When calculating a Project's payback period, cash flows are discounted at:

A risky dollar is worth more than a safe one.

The acceptance of an investment project implies that: 1.Its IRR is greater than 15 percent 2)Its NPV is greater than its IRR 3)Its NPV is greater than 0

Which of the following can be deduced about a three-year investment project that has a two-year payback period?

What is the decision rule in the case of sign changes that produce multiple IRRs for a project?

Goals and Governance of the Firm

Financial Markets and Institutions

Accounting and Finance

Measuring Corporate Performance

The Time Value of Money

Valuing Bonds

Valuing Stocks

Using Discounted Cash-Flow Analysis to Make Investment Decisions

Project Analysis

Introduction to Risk, Return, and the Opportunity Cost of Capital

Risk, Return, and Capital Budgeting

The Weighted-Average Cost of Capital and Company Valuation

Introduction to Corporate Financing and Governance

Venture Capital, Ipos, and Seasoned Offerings

Debt Policy

Payout Policy

Long-Term Financial Planning

Short-Term Financial Planning

Working Capital Management

Mergers, Acquisitions, and Corporate Control

International Financial Management

Options

Risk Management

Conclusion

What We Do and Do Not Know About Finance

Filters