公司理财(英文版)题库7

1、chapter 7net present value and other investment rulesmultiple choice questions:1. definitionsnet present valuea 1. the difference between the present value of an investment and its cost is the:a. net present value.b. internal rate of return.c. payback period.d. profitability index.e. discounted payb

2、ack period.difficulty level: easynet present value rulec 2. which one of the following statements concerning net present value (npv) is correct?an investment should be accepted if, and only if, the npv is exactly equal to zero.a. an investment should be accepted only if the npv is equal to the initi

3、al cash flow.b. an investment should be accepted if the npv is positive and rejected if it is negative.c. an investment with greater cash inflows than cash outflows, regardless of when the cash flows occur, will always have a positive npv and therefore should always be accepted.d. any project that h

4、as positive cash flows for every time period after the initial investment should be accepted.difficulty level: easypaybackc 3. the length of time required for an investment to generate cash flows sufficient to recover the initial cost of the investment is called the:a. net present value.b. internal

5、rate of return.c. payback period.d. profitability index.e. discounted cash period.difficulty level: easypayback rulea 4. which one of the following statements is correct concerning the payback period?a. an investment is acceptable if its calculated payback period is less than some prespecified perio

6、d of time.b. an investment should be accepted if the payback is positive and rejected if it is negative.an investment should be rejected if the payback is positive and accepted if it is negative.c. an investment is acceptable if its calculated payback period is greater than some prespecified period

7、of time.d. an investment should be accepted any time the payback period is less than the discounted payback period, given a positive discount rate.difficulty level: easydiscounted paybacke 5. the length of time required for a project' s discounted cash flows to equal the initialcost of the proje

8、ct is called the:a. net present value.b. internal rate of return.c. payback period.d. discounted profitability index.e. discounted payback period.difficulty level: easydiscounted payback ruled 6. the discounted payback rule states that you should accept projects:a. which have a discounted payback pe

9、riod that is greater than some pre-specified period of time.b. if the discounted payback is positive and rejected if it is negative.c. only if the discounted payback period equals some pre-specified period of time.d. if the discounted payback period is less than some pre-specified period of time.e.

10、only if the discounted payback period is equal to zero.difficulty level: easyaverage accounting returnc 7. an investment ' s average net income divided by its average book value defines the average:a. net present value.b. internal rate of return.c. accounting return.d. profitability index.e. pay

11、back period.difficulty level: easyaverage accounting return ruleb 8. an investment is acceptable if its average accounting return (aar):a. is less than a target aar.b. exceeds a target aar.c. exceeds the firm ' s return on equity (roe).d. is less than the firm ' s return on assets (roa).e. i

12、s equal to zero and only when it is equal to zero.internal rate of returnb. 9. the discount rate that makes the net present value of an investment exactly equal to zero is called the:a. external rate of return.b. internal rate of return.c. average accounting return.d. profitability index.e. equalize

13、r.difficulty level: easyinternal rate of return ruled 10. an investment is acceptable if its irr:a. is exactly equal to its net present value (npv).b. is exactly equal to zero.c. is less than the required return.d. exceeds the required return.e. is exactly equal to 100 percent.difficulty level: easy

14、multiple rates of returne 11. the possibility that more than one discount rate will make the npv of an investment equal to zero is called the problem.a. net present value profilingb. operational ambiguityc. mutually exclusive investment decisiond. issues of scalee. multiple rates of returndifficulty

15、 level: mediummutually exclusive projectsc 12. a situation in which accepting one investment prevents the acceptance of another investment is called the:a. net present value profile.b. operational ambiguity decision.c. mutually exclusive investment decision.d. issues of scale problem.e. multiple cho

16、ices of operations decision.difficulty level: easyprofitability indexs fuftlouwrescdaisvhided by the initial cost ofd. 13. the present value of an investment thea. b.c. net present value. internal rate of return, average accounting return. profitability index.d. e. profile period.difficulty level: e

17、asyprofitability index rule a 14.ab an investment is acceptable if the profitability index (pi) of the investment is: greater than c one.d. less than one. greater than the internal rate of return (irr).e. less than the net present value (npv). greater than a pre-specified rate of return.difficulty l

18、evel: easyii. conceptsnet present value d 15.a all else constant, the net present value of a project increases when: the discount rateb. increases.c. each cash inflow is delayed by one year, the initial cost of a project increases, the rate of d. return decreases.d. all cash inflows occur during the

19、 last year of a project' s life instead ofperiodically throughout the life of the project.difficulty level: easynet present valuea 16. the primary reason that company projects with positive net present values are considered acceptable is that:they create value for the owners of the firm.the proj

20、ect ' s rate of return exceeds the rate of inflation.a- b they return the initial cash outlay within three years or less.e. the required cash inflows exceed the actual cash inflows.f. e. the investment ' s cost exceeds the present value of the cash inflows.net present valued 17. if a project

21、 has a net present value equal to zero, then:i. the present value of the cash inflows exceeds the initial cost of the project.ii. the project produces a rate of return that just equals the rate required to accept the project.iii. the project is expected to produce only the minimally required cash in

22、flows.iv. any delay in receiving the projected cash inflows will cause the project to have a negative net present value.a. iiand iiionlyb. iiand ivonlyc. i,ii, andiv onlyd. ii, iii, and iv onlye. i,ii, andiii onlydifficulty level: mediumnet present value b 18. net present value:a. cannot be used whe

23、n deciding between two mutually exclusive projects.b. is more useful to decision makers than the internal rate of return when comparing different sized projects.c. is easy to explain to non-financial managers and thus is the primary method of analysis used by the lowest levels of management.d. is no

24、t an as widely used tool as payback and discounted paybacke. is very similar in its methodology to the average accounting return.difficulty level: easypaybackc 19. payback is frequently used to analyze independent projects because:a. it considers the time value of money.b. all relevant cash flows ar

25、e included in the analysis.c. it is easy and quick to calculate.d. it is the most desirable of all the available analytical methods from a financial perspective.e. it produces better decisions than those made using either npv or irr.difficulty level: easypaybackc 20. the advantages of the payback me

26、thod of project analysis include the:i. application of a discount rate to each separate cash flow.ii. bias towards liquidity.iii. ease of use.iv. arbitrary cutoff point.a. i and ii onlyb. i and iii onlyc. ii and iii onlyd. ii and iv onlye. ii, iii, and iv onlydifficulty level: mediumpaybackd 21. all

27、 else equal, the payback period for a project will decrease whenever the: a. initial cost increases.b. required return for a project increases.c. assigned discount rate decreases.d. cash inflows are moved forward in time.e. duration of a project is lengthened.difficulty level: mediumdiscounted payba

28、ckd 22. the discounted payback period of a project will decrease whenever the:a. discount rate applied to the project is increased.b. initial cash outlay of the project is increased.c. time period of the project is increased.d. amount of each project cash flow is increased.e. costs of the fixed asse

29、ts utilized in the project increase.difficulty level: mediumdiscounted paybacka 23. the discounted payback rule may cause:a. some positive net present value projects to be rejected.b. the most liquid projects to be rejected in favor of less liquid projects.c. projects to be incorrectly accepted due

30、to ignoring the time value of money.d. projects with negative net present values to be accepted.e. some projects to be accepted which would otherwise be rejected under the payback rule.difficulty level: easyinternal rate of return b 24. the internal rate of return (irr):i. rule states that a project

31、 with an irr that is less than the required rate should be accepted.ii. is the rate generated solely by the cash flows of an investment.iii. is the rate that causes the net present value of a project to exactly equal zero.iv. can effectively be used to analyze all investment scenarios.a. i and iv on

32、lyb. ii and iii onlyc. i, ii, and iii onlyd. ii, iii, and iv onlye. i, ii, iii, and ivdifficulty level: mediuminternal rate of returna 25. the internal rate of return for a project will increase if:a. the initial cost of the project can be reduced.b. the total amount of the cash inflows is reduced.c

33、. each cash inflow is moved such that it occurs one year later than originally projected.d. the required rate of return is reduced.e. the salvage value of the project is omitted from the analysis.difficulty level: mediuminternal rate of returnc 26. the internal rate of return is:a. more reliable as

34、a decision making tool than net present value whenever you are considering mutually exclusive projects.b. equivalent to the discount rate that makes the net present value equal to one.c. difficult to compute without the use of either a financial calculator or a computer.d. dependent upon the interes

35、t rates offered in the marketplace.e. a better methodology than net present value when dealing with unconventional cash flows.difficulty level: mediuminternal rate of returna 27. the internal rate of return tends to be:a. easier for managers to comprehend than the net present value.b. extremely accu

36、rate even when cash flow estimates are faulty.c. ignored by most financial analysts.d. used primarily to differentiate between mutually exclusive projects.e. utilized in project analysis only when multiple net present values apply.difficulty level: easyincremental internal rate of returne 28. you ar

37、e trying to determine whether to accept project a or project b. these projects are mutually exclusive. as part of your analysis, you should compute the incremented irr by determining:a. the internal rate of return for the cash flows of each project.b. the net present value of each project using the

38、internal rate of return as the discount rate.c. the discount rate that equates the discounted payback periods for each project.d. the discount rate that makes the net present value of each project equal to 1.e. the internal rate of return for the differences in the cash flows of the two projects.dif

39、ficulty level: mediumincremental internal rate of return b 29. graphing the incremental irr helps explain: a. why one project is always superior to another project.f. how decisions concerning mutually exclusive projects are derived.g. how the duration of a project affects the decision as to which pr

40、oject to accept.h. how the net present value and the initial cash outflow of a project are related.i. how the profitability index and the net present value are related.difficulty level: mediumprofitability indexd 30. the profitability index is closely related to:a. payback.b. discounted payback.c. t

41、he average accounting return.d. net present value.e. mutually exclusive projects.difficulty level: easyprofitability index b 31. analysis using the profitability index:a. frequently conflicts with the accept and reject decisions generated by the application of the net present value rule.b. is useful

42、 as a decision tool when investment funds are limited.c. is useful when trying to determine which one of two mutually exclusive projects should be accepted.d. utilizes the same basic variables as those used in the average accounting return.e. produces results which typically are difficult to compreh

43、end or apply.difficulty level: mediumprofitability indexe 32. if you want to review a project from a benefit-cost perspective, you should use the method of analysis.a. net present valueb. paybackc. internal rate of returnd. average accounting returne. profitability indexdifficulty level: easyprofita

44、bility index b 33. when the present value of the cash inflows exceeds the initial cost of a project, then the project should be:a. accepted because the internal rate of return is positive.b. accepted because the profitability index is greater than 1.c. accepted because the profitability index is neg

45、ative.d. rejected because the internal rate of return is negative.e. rejected because the net present value is negative.mutually exclusive projects c 34. which one of the following is the best example of two mutually exclusive projects?a. planning to build a warehouse and a retail outlet side by sid

46、eb. buying sufficient equipment to manufacture both desks and chairs simultaneouslyc. using an empty warehouse for storage or renting it entirely out to anotherfirmd. using the company sales force to promote sales of both shoes and sockse. buying both inventory and fixed assets using funds from the

47、same bond issuedifficulty level: mediummutually exclusive projectsd 35. the liberty co. is considering two projects. project a consists of building a wholesale book outlet on lot #169 of the englewood retail center. project b consists of building a sit-down restaurant on lot #169 of the englewood re

48、tail center. when trying to decide whether or build the book outlet or the restaurant, management should rely most heavily on the analysis results from the method of analysis.a. profitability indexb. internal rate of returnc. paybackd. net present valuee. accounting rate of returndifficulty level: m

49、ediummutually exclusive projectsc 36. when two projects both require the total use of the same limited economic resource, the projects are generally considered to be:a. independent.b. marginally profitable.c. mutually exclusive.d. acceptable.e. internally profitable.difficulty level: easymutually ex

50、clusive projectsc 37. matt is analyzing two mutually exclusive projects of similar size and has prepared thefollow ing data. both projects have 5 year lives.net prese nt value payback period average acco un ti ng retur n required return required aarproject a $15,090 2.76 years9.3 perce nt8.3 perce n

51、t9.0 perce ntproject b $14,693 2.51 years9.6 perce nt8.0 perce nt9.0 perce ntmatt has bee n asked for his best recomme ndati on give n this in form at i on. his recomme ndati on should be to accept:a. project b because it has the shortest payback period.b. both projectsas they both have positive net

52、 prese nt values.c. project a andrejectproject b basedon their net prese nt values.d. project b andrejectproject a basedon their average acco un ti ngretur ns.e. project b andrejectproject a basedon both the payback period and the averageacco un ti ng retur n.difficulty level: mediuminvestment analy

53、sisa 38. give n that the net prese nt value (npv) is gen erally con sidered to be the best method of an alysis, why should you still use the other methods?a. the other methods help validate whether or not the results from the net present value an alysis are reliable.b. you need to use the other meth

54、ods since conventional practice dictates that you only accept projects after you have gen erated three accept in dicators.c. you n eed to use other methods because the net prese nt value method is un reliable whe n a project has unconven ti onal cash flows.d. the average acco un ti ng return must al

55、ways in dicate accepta nee si nee this is the best method from a finan cial perspective.e. the disco un ted payback method must always be computed to determ ine if a project retur ns a positive cash flow since npv does not measure this aspect of a project.difficulty level: mediuminvestment analysise

56、 39. in actual practice, man agers freque ntly use the:i. aar because the in formati on is so readily available.ii. irr because the results are easy to com muni cate and un dersta nd.iii. payback because of its simplicity.iv. net prese nt value because it is con sidered by many to be the best method

57、 of an alysis.a. i and iii onlyb. ii a nd iii o nlyc. i, iii, and iv onlyd. ii, iii, and iv onlye. i, ii, iii, and ivdifficulty level: mediuminvestment analysis a 40. no matter how many forms of investment analysis you do: a.theactual results from a project may vary significantly from the expected results,b. theinternal rate of return will always produce the most reliable results,c. a project will never be accepted unless the payback period is met.d. theinitial costs will generally vary considerably from the esti