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21.
Samuelson Electronics has a required payback period of three years for all
of its projects. Currently, the firm is analyzing two independent projects.
Project A has an expected payback period of 2.8 years and a net present
value of $6,800. Project B has an expected payback period of 3.1 years with
a net present value of $28,400. Which projects should be accepted based on
the payback decision rule?
22.
A project has a required payback period of three years. Which one of the
following statements is correct concerning the payback analysis of this
project?
23.
A project has a discounted payback period that is equal to the required
payback period. Given this, which of the following statements must be true?
I. The project must also be acceptable under the payback rule.
II. The project must have a profitability index that is equal to or greater than
1.0.
III. The project must have a zero net present value.
IV. The project's internal rate of return must equal the required return.
24.
Which one of the following statements related to payback and discounted
payback is correct?
25.
Applying the discounted payback decision rule to all projects may cause:
26.
Which one of the following correctly applies to the average accounting rate
of return?
27.
Which one of the following is an advantage of the average accounting return
method of analysis?
28.
Which of the following are considered weaknesses in the average
accounting return method of project analysis?
I. exclusion of time value of money considerations
II. need of a cutoff rate
III. easily obtainable information for computation
IV. based on accounting values
29.
Which one of the following statements related to the internal rate of return
(IRR) is correct?
30.
The internal rate of return:
31.
Tedder Mining has analyzed a proposed expansion project and determined
that the internal rate of return is lower than the firm desires. Which one of
the following changes to the project would be most expected to increase
the project's internal rate of return?
32.
The internal rate of return is:
33.
Which of the following statements related to the internal rate of return (IRR)
are correct?
I. The IRR method of analysis can be adapted to handle non-conventional
cash flows.
II. The IRR that causes the net present value of the differences between
two project's cash flows to equal zero is called the crossover rate.
III. The IRR tends to be used more than net present value simply because
its results are easier to comprehend.
IV. Both the timing and the amount of a project's cash flows affect the value
of the project's IRR.
34.
Douglass Interiors is considering two mutually exclusive projects and have
determined that the crossover rate for these projects is 11.7 percent.
Project A has an internal rate of return (IRR) of 15.3 percent and Project B
has an IRR of 16.5 percent. Given this information, which one of the
following statements is correct?
35.
You are comparing two mutually exclusive projects. The crossover point is
12.3 percent. You have determined that you should accept project A if the
required return is 13.1 percent. This implies you should:
36.
Graphing the crossover point helps explain:
37.
A project with financing type cash flows is typified by a project that has
which one of the following characteristics?
38.
Which of the following statements generally apply to the cash flows of a
financing type project?
I. nonconventional cash flows
II. cash outflows exceed cash inflows prior to any time value adjustments
III. cash for services rendered is received prior to the cash that is spent
providing the services
IV. the total of all cash flows must equal zero on an unadjusted basis
39.
Which one of the following statements is correct in relation to independent
projects?
40.
The profitability index is most closely related to which one of the following?
