Unlock document.
This document is partially blurred.
Unlock all pages and 1 million more documents.
Get Access
Chapter 09
Net Present Value and Other Investment Criteria
Multiple Choice Questions
1.
A project has an initial cost of $27,400 and a market value of $32,600. What
is the difference between these two values called?
2.
Which one of the following methods of project analysis is defined as
computing the value of a project based upon the present value of the
project's anticipated cash flows?
3.
The length of time a firm must wait to recoup the money it has invested in a
project is called the:
4.
The length of time a firm must wait to recoup, in present value terms, the
money it has in invested in a project is referred to as the:
5.
A project's average net income divided by its average book value is referred
to as the project's average:
6.
The internal rate of return is defined as the:
7.
You are viewing a graph that plots the NPVs of a project to various discount
rates that could be applied to the project's cash flows. What is the name
given to this graph?
8.
There are two distinct discount rates at which a particular project will have
a zero net present value. In this situation, the project is said to:
9.
If a firm accepts Project A it will not be feasible to also accept Project B
because both projects would require the simultaneous and exclusive use of
the same piece of machinery. These projects are considered to be:
10.
The present value of an investment's future cash flows divided by the initial
cost of the investment is called the:
11.
A project has a net present value of zero. Which one of the following best
describes this project?
12.
Which one of the following will decrease the net present value of a project?
13.
Which one of the following methods determines the amount of the change a
proposed project will have on the value of a firm?
14.
If a project has a net present value equal to zero, then:
15.
Rossiter Restaurants is analyzing a project that requires $180,000 of fixed
assets. When the project ends, those assets are expected to have an
aftertax salvage value of $45,000. How is the $45,000 salvage value handled
when computing the net present value of the project?
16.
Which one of the following increases the net present value of a project?
17.
Net present value:
18.
Which one of the following is a project acceptance indicator given an
independent project with investing type cash flows?
19.
Why is payback often used as the sole method of analyzing a proposed
small project?
20.
Which of the following are advantages of the payback method of project
analysis?
I. works well for research and development projects
II. liquidity bias
III. ease of use
IV. arbitrary cutoff point
