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A) Net present value B) Internal rate of return C) Payback period D) Average accounting return E) Discounted payback 2
A) III only B) II only C) I only D) I and III only E) II and III only 3
A) independent projects B) mutually exclusive projects C) positive NPV projects D) crossover projects E) working capital projects 4
A) The NPV is negative B) $0.71 C) $0.00 D) $19.79 E) $64.10 5
A) 24% B) 18% C) 22% D) 20% E) 16% 6
Year 0 1 2 3 4 Cash Flow -$85,000 $30,000 $20,000 $15,000 $10,000
A) 4 years B) The investment doesn't payback. C) 2 years D) 1 year E) 3 years 7
Year 0 1 2 3 4 5 Cash Flow -$100,000 $40,000 $40,000 $40,000 $40,000 -$50,000
A) Yes, because the payback is 2.5 years. B) Yes, because the discounted payback is 4 years. C) Yes, because both the payback and the discounted payback are less than 2 years. D) No, because the NPV is negative. E) No, because the project has a large negative cash flow at the end of its life. 8
A) An investment is acceptable if its calculated payback period is less than some prespecified number of years. B) An investment should be accepted if the payback is positive and rejected if it is negative. C) An investment should be rejected if the payback is positive and accepted if it is negative. D) An investment is acceptable if its calculated payback period is greater than some prespecified number of years. 9
A) $0.00 B) $61.22 C) $118.75 D) $208.04 E) $269.21 10
A) The project never pays back. B) 4.75 years C) 5.00 years D) 6.00 years E) 5.33 years
2002 McGraw-Hill Higher Education