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1. Of the capital budgeting techniques discussed, which works equally well with normal and
non-normal cash flows and with independent and mutually exclusive projects?
2. The net present value decision technique uses a statistic denominated in:
3. The net present value decision technique may not be the only pertinent unit of measure if
the firm is facing:
4. All capital budgeting techniques:
5. Rate-based statistics represent summary cash flows, and these summaries tend to lose
which two important details?
6. Which of the following is a technique for evaluating capital projects that tells how long it
will take a firm to earn back the money invested in a project?
7. Which of the following is a technique for evaluating capital projects that tells how long it
will take a firm to earn back the money invested in a project plus interest at market rates?
8. Which of the following is a technique for evaluating capital projects that is particularly
useful when firms face time constraints in repaying investors?
9. Neither payback period nor discounted payback period techniques for evaluating capital
projects account for:
10. When choosing between two mutually exclusive projects using the payback period
method for evaluating capital projects, one would choose:
11. Which rate-based decision statistic measures the excess return (the amount above and
beyond the cost of capital for a project), rather than the gross return?
12. The benchmark for the profitability index (PI) is the:
13. Which of these describe groups or pairs of projects where you can accept one but not
all?
14. 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?
15. Which of these is a capital budgeting technique that generates a decision rule and
associated metric for choosing projects based on the total discounted value of their cash flows?
16. 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?
17. Which of the following is a capital budgeting technique that converts a project's cash
flows using a more consistent reinvestment rate prior to applying the Internal Rate of Return, IRR,
decision rule?
18. A graph of a project's ________ is a function of cost of capital.
19. Compute the NPV for Project X and accept or reject the project with the cash flows
shown as follows if the appropriate cost of capital is 10 percent.
20. Compute the NPV for Project X and accept or reject the project with the cash flows
shown as follows if the appropriate cost of capital is 9 percent.
21. Compute the payback statistic for Project X 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 10 percent and the maximum allowable payback is five years.
22. Compute the payback statistic for Project X 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 9 percent and the maximum allowable payback is four years.
23. Compute the 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 11 percent and the maximum allowable payback is one year.
24. Compute the discounted payback statistic for Project X 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 10 percent and the maximum allowable discounted payback is three years.
25. 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.
26. Compute the IRR statistic for Project X and note whether the firm should accept or reject
the project with the cash flows shown as follows if the appropriate cost of capital is 10 percent.
27. Compute the IRR for Project X and note whether the firm should accept or reject the
project with the cash flows shown as follows if the appropriate cost of capital is 9 percent.
28. Compute the MIRR statistic for Project X and note whether the firm should accept or
reject the project with the cash flows shown as follows if the appropriate cost of capital is 10
percent.
