Site MapHelpFeedbackMultiple Choice Quiz
Multiple Choice Quiz
(See related pages)

1
What is the NPV of a project that costs $50,000 and returns $30,000 annually for three years if the opportunity cost of capital is 12%?
A)$12,047.88
B)$16,887.97
C)$22,054.94
D)$25,374.23
2
What is approximately the maximum amount that a firm should consider paying for a project that will return $12,000 annually for 6 years if the opportunity cost is 12%?
A)$49,336.89
B)$64,758.33
C)$93,920.43
D)$110,345.23
3
If a three year investment project has a two year payback period, which of the following can be deduced?
A)The IRR is greater than the cost of capital
B)The NPV is positive
C)Neither 'a' nor 'b'
D)Both 'a' and 'b'
4
What is the IRR of a project that costs $74,361.78 and provides cash inflows of $25,000 annually for four years?
A)9.85%
B)11.02%
C)13.00%
D)14.85%
5
What is the NPV for the following project cash flows at a discount rate of 12.50%? CF0=($750), CF1= $500, CF2= $500, CF3= $500.
A)($440.67)
B)($220.33)
C)$220.33
D)$440.67
6
Which mutually exclusive project should be selected, based on a 15% cost of capital and the following: Project X's IRR = 16%; Project Y's IRR = 13%; Incremental Project (Y-X's) IRR = 18%
A)Project X
B)Project Y
C)Incremental Project
D)None of the projects should be selected
7
Soft capital rationing is:
A)costless to the shareholders of the company
B)costly to the firm, unlike hard rationing
C)imposed to maximize the firm's average IRR
D)imposed by the management team of the firm
8
If a project has a cost of $60,000 and a profitability index of 0.5, then:
A)its NPV is $30,000
B)its IRR is 50%
C)the present value of its cash inflows are $40,000
D)its cash inflows are $90,000
9
The profitability index for a project costing $18,000 and returning $3,500 annually for five years at an opportunity cost of capital of 8.5% is:
A)(.7764)
B)(.2338)
C).2338
D).7764
10
If a project requires an initial investment of $30,000 and returns $7500 annually for four years, then what can be assumed about the NPV?
A)The NPV is positive
B)The NPV is zero
C)The NPV is negative
D)Nothing can be assumed about the NPV
11
What is the minimum cash flow that could be received at the end of year three to make a project (with an initial investment of $40,000 with cash flows for the first and second year of $13,000 and an opportunity cost of capital of 12.5%) "acceptable"?
A)$18,000.00
B)$18,274.84
C)$19,284.47
D)$25,875.00
12
If a project's IRR is 11% and the project provides annual cash flows of $15,000 for six years, how much did the project cost?
A)$60,000.00
B)$61,258.55
C)$63,458.07
D)$68,746.84
13
A currently used machine costs $7750 annually to run. What is the maximum that should be paid to replace the machine with one that will last four years and cost $3575 annually to operate? The opportunity cost of capital is 15%.
A)$10,000.00
B)$11,348.54
C)$11,919.53
D)$12,348.54
14
Your car costs $2500 annually in maintenance expense, because of its age. You could replace it with a newer vehicle costing $6500. Both vehicles would be expected to last five more years. If your opportunity cost is 7.5%, by how much must maintenance expense decrease on the newer vehicle to justify its purchase?
A)$1000.00
B)$1303.29
C)$1606.57
D)$4000.00
15
What is the EAC of a machine that lasts 3 years, costs $15,000 initially and $4,000 per year to run, with a discount rate of 6 percent?
A)$8,230.00
B)$9,610.00
C)$10,110.11
D)$11,450.00





To learn more about the book this website supports, please visit its Information Center.
(c)2006 McGraw-Hill Higher Education
Any use is subject to the Terms of Use and Privacy Policy.
McGraw-Hill Higher Education is one of the many fine businesses of The McGraw-Hill Companies.


Fund of Corporate FinanceOnline Learning Center

Home > Chapter 7 > Multiple Choice Quiz