Unlock document.
This document is partially blurred.
Unlock all pages and 1 million more documents.
Get Access
46. As long as the NPV of a project declines smoothly with increases in the discount rate, the
project is acceptable if its:
47. A project can have as many different internal rates of return as it has:
48. What is the NPV for the following project cash flows at a discount rate of 15%?
C
0 =
($1,000),
C
1 = $700,
C
2 = $700.
49. Evaluate the following project using an IRR criterion, based on an opportunity cost of
10%:
C
0 = -$6,000,
C
1 = $3,300,
C
2 = $3,300.
50. A project costing $20,000 generates cash inflows of $9,000 annually for the first 3 years,
followed by cash outflows of $1,000 annually for 2 years. At most, this project has ______
different IRR(s).
51. How many IRRs are possible for the following set of cash flows?
CF
0 = -$1,000,
C
1 =
$500,
C
2 = -$300,
C
3 = $1,000,
C
4 = $200.
52. Given a particular set of project cash flows, which one of the following statements must
be correct?
53. When projects are mutually exclusive, selection should be made according to the project
with the:
54. When managers select correctly from among mutually exclusive projects, they:
55. Why may the IRR criterion lead to an incorrect decision when applied to mutually
exclusive projects?
56. When will you be indifferent between two mutually exclusive projects of similar size?
57. When managers cannot determine whether to invest now or wait until costs decrease
later, the rule should be to:
58. You are analyzing a project that is equivalent to borrowing money. This project's:
59. When mutually exclusive projects have different lives, the project that should be selected
will have the:
60. Which mutually exclusive project would you select, if both are priced at $1,000 and your
required return is 15%: Project A with three annual cash flows of $1,000; or Project B, with 3
years of zero cash flow followed by 3 years of $1,500 annually?
61. Which one of the following best illustrates the problem imposed by capital rationing?
62. Soft capital rationing:
63. Soft capital rationing is imposed upon a firm from _____ sources, while hard capital
rationing is imposed from _____ sources.
64. If a project has a cost of $50,000 and a profitability index of .4, then:
65. When hard capital rationing exists, projects may be accurately evaluated by use of:
66. Use of a profitability index to evaluate mutually exclusive projects in the absence of
capital rationing:
67. The profitability index selects projects based on the:
68. Which of the following investment criteria takes the time value of money into
consideration?
69. When calculating a project's payback period, cash flows are discounted at:
70. What is the profitability index for a project costing $40,000 and returning $15,000
annually for 4 years at an opportunity cost of capital of 12%?
71. Which of the following statements is true for a project with a $20,000 initial cost, cash
72. The "gold standard" of investment criteria refers to the:
73. Which of the following investment decision rules tends to improperly reject long-lived
projects?
74. The ratio of net present value to initial investment is known as the:
75. For mutually exclusive projects, the IRR can be used to select the best project:
76. The opportunity cost of capital is equal to:
77. Borrowing and lending projects usually can be distinguished by whether:
78. A project with an IRR that is less than the opportunity cost of capital should be:
79. If a project's expected rate of return exceeds its opportunity cost of capital, one would
expect:
80. Which one of the following should be assumed about a project that requires a $100,000
investment at time zero, then returns $20,000 annually for 5 years?
81. If two projects offer the same positive NPV, then they:
82. What is the minimum cash flow that could be received at the end of year 3 to make the
following project "acceptable"? Initial cost = $100,000; cash flows at end of years 1 and 2 =
$35,000; opportunity cost of capital = 10%.
83. According to the NPV rule, all projects should be accepted if NPV is positive when
discounted at the:
84. If a project's IRR is 13% and the project provides annual cash flows of $15,000 for 4
years, how much did the project cost?
