公司理财英文版题库7

CHAPTER7NetPresentValueandOtherInvestmentRulesMultipleChoiceQuestions:DEFINITIONSNETPRESENTVALUE1.Thedifferencebetweenthepresentvalueofaninvestmentanditscostisthe:fitabilityindex.discountedpaybackperiod.Difficultylevel:EasyNETPRESENTVALUERULE2.Whichoneofthefollowingstatementsconcerningnetpresentvalue(NPV)iscorrect?Aninvestmentshouldbeacceptedif,andonlyif,theNPVisexactlyequaltozero.AninvestmentshouldbeacceptedonlyiftheNPVisequaltotheinitialcashflow.AninvestmentshouldbeacceptediftheNPVispositiveandrejectedifitisnegative.Aninvestmentwithgreatercashinflowsthancashoutflows,regardlessofwhenthecashflowsoccur,willalwayshaveapositiveNPVandthereforeshouldalwaysbeaccepted.Anyprojectthathaspositivecashflowsforeverytimeperiodaftertheinitialinvestmentshouldbeaccepted.Difficultylevel:EasyPAYBACK3.Thelengthoftimerequiredforaninvestmenttogeneratecashflowssufficienttorecovertheinitialcostoftheinvestmentiscalledthe:fitabilityindex.discountedcashperiod.Difficultylevel:EasyPAYBACKRULE4.Whichoneofthefollowingstatementsiscorrectconcerningthepaybackperiod?Aninvestmentisacceptableifitscalculatedpaybackperiodislessthansomepre-specifiedperiodoftime.Aninvestmentshouldbeacceptedifthepaybackispositiveandrejectedifitisnegative.优选文档，供参照！Aninvestmentshouldberejectedifthepaybackispositiveandacceptedifitisnegative.Aninvestmentisacceptableifitscalculatedpaybackperiodisgreaterthansomepre-specifiedperiodoftime.Aninvestmentshouldbeacceptedanytimethepaybackperiodislessthanthediscountedpaybackperiod,givenapositivediscountrate.Difficultylevel:EasyDISCOUNTEDPAYBACKe5.Thelengthoftimerequiredforaproject’sdiscountedcashflowstoequaltheinitialcostoftheprojectiscalledthe:ernalrateofreturn.c.paybackperiod.d.discountedprofitabilityindex.e.discountedpaybackperiod.Difficultylevel:EasyDISCOUNTEDPAYBACKRULE6.Thediscountedpaybackrulestatesthatyoushouldacceptprojects:whichhaveadiscountedpaybackperiodthatisgreaterthansomepre-specifiedperiodoftime.ifthediscountedpaybackispositiveandrejectedifitisnegative.onlyifthediscountedpaybackperiodequalssomepre-specifiedperiodoftime.ifthediscountedpaybackperiodislessthansomepre-specifiedperiodoftime.onlyifthediscountedpaybackperiodisequaltozero.Difficultylevel:EasyAVERAGEACCOUNTINGRETURNc7.Aninvestment’saveragenetincomedividedbyitsaveragebookvaluedefinestheaverage:fitabilityindex.paybackperiod.Difficultylevel:EasyAVERAGEACCOUNTINGRETURNRULE8.Aninvestmentisacceptableifitsaverageaccountingreturn(AAR):islessthanatargetAAR.exceedsatargetAAR.exceedsthefirm’sreturnonequity(ROE).优选文档，供参照！d.islessthanthefirm’sreturnonassets(ROA).isequaltozeroandonlywhenitisequaltozero.Difficultylevel:EasyINTERNALRATEOFRETURN9.Thediscountratethatmakesthenetpresentvalueofaninvestmentexactlyequaltozeroiscalledthe:fitabilityindex.equalizer.Difficultylevel:EasyINTERNALRATEOFRETURNRULE10.AninvestmentisacceptableifitsIRR:isexactlyequaltoitsnetpresentvalue(NPV).isexactlyequaltozero.islessthantherequiredreturn.exceedstherequiredreturn.isexactlyequalto100percent.Difficultylevel:EasyMULTIPLERATESOFRETURN11.ThepossibilitythatmorethanonediscountratewillmaketheNPVofaninvestmentequaltozeroiscalledthe_____presentvalueprofilingoperationalambiguitymutuallyexclusiveinvestmentdecisionissuesofscalemultipleratesofreturnDifficultylevel:MediumMUTUALLYEXCLUSIVEPROJECTS12.Asituationinwhichacceptingoneinvestmentpreventstheacceptanceofanotherinvestmentiscalledthe:netpresentvalueprofile.operationalambiguitydecision.mutuallyexclusiveinvestmentdecision.issuesofscaleproblem.multiplechoicesofoperationsdecision.Difficultylevel:Easy优选文档，供参照！PROFITABILITYINDEXd.13.Thepresentvalueofaninvestment’sfutureflowscashdividedbytheinitialcostoftheinvestmentiscalledthe:fileperiod.Difficultylevel:EasyPROFITABILITYINDEXRULE14.Aninvestmentisacceptableiftheprofitabilityindex(PI)oftheinvestmentis:greaterthanone.lessthanone.greaterthantheinternalrateofreturn(IRR).lessthanthenetpresentvalue(NPV).greaterthanapre-specifiedrateofreturn.Difficultylevel:EasyCONCEPTSNETPRESENTVALUE15.Allelseconstant,thenetpresentvalueofaprojectincreaseswhen:thediscountrateincreases.eachcashinflowisdelayedbyoneyear.theinitialcostofaprojectincreases.therateofreturndecreases.e.allcashinflowsoccurduringthelastyearofaproject’slifeinsteadofperiodicallythroughoutthelifeoftheproject.Difficultylevel:EasyNETPRESENTVALUE16.Theprimaryreasonthatcompanyprojectswithpositivenetpresentvaluesareconsideredacceptableisthat:theycreatevaluefortheownersofthefirm.theproject’srateofreturnexceedstherateofinflation.theyreturntheinitialcashoutlaywithinthreeyearsorless.therequiredcashinflowsexceedtheactualcashinflows.theinvestment’scostexceedsthepresentvalueofthecashinflows.Difficultylevel:Easy优选文档，供参照！NETPRESENTVALUE17.Ifaprojecthasanetpresentvalueequaltozero,then:I.thepresentvalueofthecashinflowsexceedstheinitialcostoftheproject.theprojectproducesarateofreturnthatjustequalstheraterequiredtoaccepttheproject.theprojectisexpectedtoproduceonlytheminimallyrequiredcashinflows.IV.anydelayinreceivingtheprojectedcashinflowswillcausetheprojecttohaveanegativenetpresentvalue.IIandIIIonlyIIandIVonlyI,II,andIVonlyII,III,andIVonlyI,II,andIIIonlyDifficultylevel:MediumNETPRESENTVALUE18.Netpresentvalue:cannotbeusedwhendecidingbetweentwomutuallyexclusiveprojects.ismoreusefultodecisionmakersthantheinternalrateofreturnwhencomparingdifferentsizedprojects.iseasytoexplaintonon-financialmanagersandthusistheprimarymethodofanalysisusedbythelowestlevelsofmanagement.isnotanaswidelyusedtoolaspaybackanddiscountedpaybackisverysimilarinitsmethodologytotheaverageaccountingreturn.Difficultylevel:EasyPAYBACK19.Paybackisfrequentlyusedtoanalyzeindependentprojectsbecause:itconsidersthetimevalueofmoney.allrelevantcashflowsareincludedintheanalysis.itiseasyandquicktocalculate.itisthemostdesirableofalltheavailableanalyticalmethodsfromafinancialperspective.itproducesbetterdecisionsthanthosemadeusingeitherNPVorIRR.Difficultylevel:EasyPAYBACK20.Theadvantagesofthepaybackmethodofprojectanalysisincludethe:I.applicationofadiscountratetoeachseparatecashflow.biastowardsliquidity.easeofuse.IV.arbitrarycutoffpoint.IandIIonlyIandIIIonlyIIandIIIonly优选文档，供参照！IIandIVonlyII,III,andIVonlyDifficultylevel:MediumPAYBACK21.Allelseequal,thepaybackperiodforaprojectwilldecreasewheneverthe:initialcostincreases.requiredreturnforaprojectincreases.assigneddiscountratedecreases.cashinflowsaremovedforwardintime.durationofaprojectislengthened.Difficultylevel:MediumDISCOUNTEDPAYBACK22.Thediscountedpaybackperiodofaprojectwilldecreasewheneverthe:discountrateappliedtotheprojectisincreased.initialcashoutlayoftheprojectisincreased.timeperiodoftheprojectisincreased.amountofeachprojectcashflowisincreased.costsofthefixedassetsutilizedintheprojectincrease.Difficultylevel:MediumDISCOUNTEDPAYBACK23.Thediscountedpaybackrulemaycause:jectswithnegativenetpresentvaluestobeaccepted.someprojectstobeacceptedwhichwouldotherwiseberejectedunderthepaybackrule.Difficultylevel:EasyINTERNALRATEOFRETURN24.Theinternalrateofreturn(IRR):I.rulestatesthataprojectwithanIRRthatislessthantherequiredrateshouldbeaccepted.istherategeneratedsolelybythecashflowsofaninvestment.istheratethatcausesthenetpresentvalueofaprojecttoexactlyequalzero.IV.caneffectivelybeusedtoanalyzeallinvestmentscenarios.IandIVonlyIIandIIIonlyI,II,andIIIonlyII,III,andIVonly优选文档，供参照！I,II,III,andIVDifficultylevel:MediumINTERNALRATEOFRETURN25.Theinternalrateofreturnforaprojectwillincreaseif:theinitialcostoftheprojectcanbereduced.thetotalamountofthecashinflowsisreduced.eachcashinflowismovedsuchthatitoccursoneyearlaterthanoriginallyprojected.therequiredrateofreturnisreduced.thesalvagevalueoftheprojectisomittedfromtheanalysis.Difficultylevel:MediumINTERNALRATEOFRETURN26.Theinternalrateofreturnis:morereliableasadecisionmakingtoolthannetpresentvaluewheneveryouareconsideringmutuallyexclusiveprojects.equivalenttothediscountratethatmakesthenetpresentvalueequaltoone.difficulttocomputewithouttheuseofeitherafinancialcalculatororacomputer.dependentupontheinterestratesofferedinthemarketplace.abettermethodologythannetpresentvaluewhendealingwithunconventionalcashflows.Difficultylevel:MediumINTERNALRATEOFRETURN27.Theinternalrateofreturntendstobe:easierformanagerstocomprehendthanthenetpresentvalue.extremelyaccurateevenwhencashflowestimatesarefaulty.ignoredbymostfinancialanalysts.usedprimarilytodifferentiatebetweenmutuallyexclusiveprojects.utilizedinprojectanalysisonlywhenmultiplenetpresentvaluesapply.Difficultylevel:EasyINCREMENTALINTERNALRATEOFRETURN28.YouaretryingtodeterminewhethertoacceptprojectAorprojectB.Theseprojectsaremutuallyexclusive.Aspartofyouranalysis,youshouldcomputetheincrementedIRRbydetermining:theinternalrateofreturnforthecashflowsofeachproject.thenetpresentvalueofeachprojectusingtheinternalrateofreturnasthediscountrate.thediscountratethatequatesthediscountedpaybackperiodsforeachproject.thediscountratethatmakesthenetpresentvalueofeachprojectequalto1.theinternalrateofreturnforthedifferencesinthecashflowsofthetwoprojects.优选文档，供参照！Difficultylevel:MediumINCREMENTALINTERNALRATEOFRETURN29.GraphingtheincrementalIRRhelpsexplain:whyoneprojectisalwayssuperiortoanotherproject.howdecisionsconcerningmutuallyexclusiveprojectsarederived.howthedurationofaprojectaffectsthedecisionastowhichprojecttoaccept.howthenetpresentvalueandtheinitialcashoutflowofaprojectarerelated.howtheprofitabilityindexandthenetpresentvaluearerelated.Difficultylevel:MediumPROFITABILITYINDEX30.Theprofitabilityindexiscloselyrelatedto:presentvalue.mutuallyexclusiveprojects.Difficultylevel:EasyPROFITABILITYINDEX31.Analysisusingtheprofitabilityindex:ducesresultswhichtypicallyaredifficulttocomprehendorapply.Difficultylevel:MediumPROFITABILITYINDEX32.Ifyouwanttoreviewaprojectfromabenefit-costperspective,youshouldusethe_____presentvaluepaybackinternalrateofreturnaverageaccountingreturnprofitabilityindexDifficultylevel:EasyPROFITABILITYINDEX优选文档，供参照！33.Whenthepresentvalueofthecashinflowsexceedstheinitialcostofaproject,thentheprojectshouldbe:acceptedbecausetheinternalrateofreturnispositive.acceptedbecausetheprofitabilityindexisgreaterthan1.acceptedbecausetheprofitabilityindexisnegative.rejectedbecausetheinternalrateofreturnisnegative.rejectedbecausethenetpresentvalueisnegative.Difficultylevel:EasyMUTUALLYEXCLUSIVEPROJECTS34.Whichoneofthefollowingisthebestexampleoftwomutuallyexclusiveprojects?planningtobuildawarehouseandaretailoutletsidebysidebuyingsufficientequipmenttomanufacturebothdesksandchairssimultaneouslyusinganemptywarehouseforstorageorrentingitentirelyouttoanotherfirmusingthecompanysalesforcetopromotesalesofbothshoesandsocksbuyingbothinventoryandfixedassetsusingfundsfromthesamebondissueDifficultylevel:MediumMUTUALLYEXCLUSIVEPROJECTSd35.TheLibertyCo.isconsideringtwoprojects.ProjectAconsistsofbuildingawholesalebookoutletonlot#169oftheEnglewoodRetailCenter.ProjectBconsistsofbuildingasit-downrestaurantonlot#169oftheEnglewoodRetailCenter.Whentryingtodecidewhetherorbuildthebookoutletortherestaurant,managementshouldrelymostheavilyontheanalysisresultsfromthe_____fitabilityindexinternalrateofreturnpaybacknetpresentvalueaccountingrateofreturnDifficultylevel:MediumMUTUALLYEXCLUSIVEPROJECTS36.Whentwoprojectsbothrequirethetotaluseofthesamelimitedeconomicresource,theprojectsaregenerallyconsideredtobe:ernallyprofitable.Difficultylevel:EasyMUTUALLYEXCLUSIVEPROJECTSc37.Mattisanalyzingtwomutuallyexclusiveprojectsofsimilarsizeandhaspreparedthe优选文档，供参照！followingdata.Bothprojectshave5yearlives.ProjectAProjectBNetpresentvalue$15,090$14,693Paybackperiod2.76years2.51yearsAverageaccountingreturn9.3percent9.6percentRequiredreturn8.3percent8.0percentRequiredAAR9.0percent9.0percentMatthasbeenaskedforhisbestrecommendationgiventhisinformation.Hisrecommendationshouldbetoaccept:projectBjectAandrejectprojectBjectBandrejectprojectAjectBandrejectprojectAbasedonboththepaybackperiodandtheaverageaccountingreturn.Difficultylevel:MediumINVESTMENTANALYSIS38.Giventhatthenetpresentvalue(NPV)isgenerallyconsideredtobethebestmethodofanalysis,whyshouldyoustillusetheothermethods?Theothermethodshelpvalidatewhetherornottheresultsfromthenetpresentvalueanalysisarereliable.Youneedtousetheothermethodssinceconventionalpracticedictatesthatyouonlyacceptprojectsafteryouhavegeneratedthreeacceptindicators.Youneedtouseothermethodsbecausethenetpresentvaluemethodisunreliablewhenaprojecthasunconventionalcashflows.Theaverageaccountingreturnmustalwaysindicateacceptancesincethisisthebestmethodfromafinancialperspective.ThediscountedpaybackmethodmustalwaysbecomputedtodetermineifaprojectreturnsapositivecashflowsinceNPVdoesnotmeasurethisaspectofaproject.Difficultylevel:MediumINVESTMENTANALYSIS39.Inactualpractice,managersfrequentlyusethe:I.AARbecausetheinformationissoreadilyavailable.IRRbecausetheresultsareeasytocommunicateandunderstand.paybackbecauseofitssimplicity.IV.netpresentvaluebecauseitisconsideredbymanytobethebestmethodofanalysis.IandIIIonlyIIandIIIonlyI,III,andIVonlyII,III,andIVonlyI,II,III,andIV优选文档，供参照！Difficultylevel:MediumINVESTMENTANALYSIS40.Nomatterhowmanyformsofinvestmentanalysisyoudo:theactualresultsfromaprojectmayvarysignificantlyfromtheexpectedresults.theinternalrateofreturnwillalwaysproducethemostreliableresults.aprojectwillneverbeacceptedunlessthepaybackperiodismet.theinitialcostswillgenerallyvaryconsiderablyfromtheestimatedcosts.onlythefirstthreeyearsofaprojecteveraffectitsfinaloutcome.Difficultylevel:EasyINVESTMENTANALYSIS41.Whichofthefollowingmethodsofprojectanalysisarebiasedtowardsshort-termprojects?internalrateofreturnaccountingrateofreturnpaybackIV.discountedpaybackIandIIonlyIIIandIVonlyIIandIIIonlyIandIVonlyIIandIVonlyDifficultylevel:MediumINVESTMENTANALYSISa42.Ifaprojectisassignedarequiredrateofreturnequaltozero,then:a.thetimingoftheproject’scashflowshasnobearingonthevalueoftheproject.theprojectwillalwaysbeaccepted.theprojectwillalwaysberejected.whethertheprojectisacceptedorrejectedwilldependonthetimingofthecashflows.theprojectcanneveraddvaluefortheshareholders.Difficultylevel:MediumDECISIONRULESe43.Youareconsideringaprojectwiththefollowingdata:Internalrateofreturn8.7percentProfitabilityratio.98Netpresentvalue-$393Paybackperiod2.44yearsRequiredreturn9.5percentWhichoneofthefollowingiscorrectgiventhisinformation?优选文档，供参照！Thediscountrateusedincomputingthenetpresentvaluemusthavebeenlessthan8.7percent.Thediscountedpaybackperiodwillhavetobelessthan2.44years.Thediscountrateusedtocomputetheprofitabilityratiowasequaltotheinternalrateofreturn.Thisprojectshouldbeacceptedbasedontheprofitabilityratio.Thisprojectshouldberejectedbasedontheinternalrateofreturn.Difficultylevel:MediumNETPRESENTVALUE44.AcceptingpositiveNPVprojectsbenefitsthestockholdersbecause:itisthemosteasilyunderstoodvaluationprocess.thepresentvalueoftheexpectedcashflowsareequaltothecost.thepresentvalueoftheexpectedcashflowsaregreaterthanthecost.itisthemosteasilycalculated.Noneoftheabove.Difficultylevel:EasyNETPRESENTVALUE45.WhichofthefollowingdoesnotcharacterizeNPV?NPVdoesnotincorporateriskintotheanalysis.NPVincorporatesallrelevantinformation.NPVusesalloftheproject'scashflows.NPVdiscountsallfuturecashflows.UsingNPVwillleadtodecisionsthatmaximizeshareholderwealth.Difficultylevel:EasyPAYBACK46.Thepaybackperiodrule:discountscashflows.ignoresinitialcost.alwaysusesallpossiblecashflowsinitscalculation.BothAandC.Noneoftheabove.Difficultylevel:EasyPAYBACK47.Thepaybackperiodruleacceptsallinvestmentprojectsinwhichthepaybackperiodforthecashflowsis:equaltothecutoffpoint.greaterthanthecutoffpoint.lessthanthecutoffpoint.positive.优选文档，供参照！Noneoftheabove.Difficultylevel:EasyPAYBACK48.Thepaybackperiodruleisaconvenientandusefultoolbecause:itprovidesaquickestimateofhowrapidlytheinitialinvestmentwillberecouped.resultsofashortpaybackruledecisionwillbequicklyseen.itdoesnottakeintoaccounttimevalueofmoney.Alloftheabove.Noneoftheabove.Difficultylevel:EasyDISCOUNTEDPAYBACK49.Thediscountedpaybackperiodrule:considersthetimevalueofmoney.discountsthecutoffpoint.ignoresuncertaincashflows.ispreferredtotheNPVrule.Noneoftheabove.Difficultylevel:EasyPAYBACK50.Thepaybackperiodrule:determinesacutoffpointsothatallprojectsacceptedbytheNPVrulewillbeacceptedbythepaybackperiodrule.determinesacutoffpointsothatdepreciationisjustequaltopositivecashflowsinthepaybackyear.requiresanarbitrarychoiceofacutoffpoint.variesthecutoffpointwiththeinterestrate.BothAandD.Difficultylevel:EasyAVERAGEACCOUNTINGRETURN51.Theaverageaccountingreturnisdeterminedby:dividingtheyearlycashflowsbytheinvestment.dividingtheaveragecashflowsbytheinvestment.dividingtheaveragenetincomebytheaverageinvestment.dividingtheaveragenetincomebytheinitialinvestment.dividingthenetincomebythecashflow.Difficultylevel:Easy优选文档，供参照！AVERAGEACCOUNTINGRETURN52.Theinvestmentdecisionrulethatrelatesaveragenetincometoaverageinvestmentisthe:discountedcashflowmethod.averageaccountingreturnmethod.averagepaybackmethod.averageprofitabilityindex.Noneoftheabove.Difficultylevel:EasyMODIFIEDINTERNALRATEOFRETURN53.Modifiedinternalrateofreturn:handlesthemultipleIRRproblembycombiningcashflowsuntilonlyonechangeinsignchangeremains.requirestheuseofadiscountrate.doesnotrequiretheuseofadiscountrate.BothAandB.BothAandC.Difficultylevel:MediumAVERAGEACCOUNTINGRETURN54.Theshortcoming(s)oftheaverageaccountingreturn(AAR)methodis(are):theuseofnetincomeinsteadofcashflows.thepatternofincomeflowshasnoimpactontheAAR.thereisnoclear-cutdecisionrule.Alloftheabove.Noneoftheabove.Difficultylevel:MediumINTERNALRATEOFRETURN55.Thetwofatalflawsoftheinternalrateofreturnruleare:arbitrarydeterminationofadiscountrateandfailuretoconsiderinitialexpenditures.arbitrarydeterminationofadiscountrateandfailuretocorrectlyanalyzemutuallyexclusiveinvestmentprojects.arbitrarydeterminationofadiscountrateandthemultiplerateofreturnproblem.failuretoconsiderinitialexpendituresandfailuretocorrectlyanalyzemutuallyexclusiveinvestmentprojects.failuretocorrectlyanalyzemutuallyexclusiveinvestmentprojectsandthemultiplerateofreturnproblem.Difficultylevel:MediumMUTUALLYEXCLUSIVEPROJECTSd56.Amutuallyexclusiveprojectisaprojectwhose:优选文档，供参照！acceptanceorrejectionhasnoeffectonotherprojects.NPVisalwaysnegative.IRRisalwaysnegative.acceptanceorrejectionaffectsotherprojects.cashflowpatternexhibitsmorethanonesignchange.Difficultylevel:EasyINTERNALRATEOFRETURN57.AprojectwillhavemorethanoneIRRif:theIRRispositive.theIRRisnegative.theNPViszero.thecashflowpatternexhibitsmorethanonesignchange.thecashflowpatternexhibitsexactlyonesignchange.Difficultylevel:EasyINTERNALRATEOFRETURNRULES58.Usinginternalrateofreturn,aconventionalprojectshouldbeacceptediftheinternalrateofreturnis:equaltothediscountrate.greaterthanthediscountrate.lessthanthediscountrate.negative.positive.Difficultylevel:EasyINTERNALRATEOFRETURN59.Theinternalrateofreturnmaybedefinedas:thediscountratethatmakestheNPVcashflowsequaltozero.thedifferencebetweenthemarketrateofinterestandtheNPV.themarketrateofinterestlesstherisk-freerate.theprojectacceptanceratesetbymanagement.Noneoftheabove.Difficultylevel:MediumMULTIPLEINTERNALRATEOFRETURNS60.TheproblemofmultipleIRRscanoccurwhen:thereisonlyonesignchangeinthecashflows.thefirstcashflowisalwayspositive.thecashflowsdeclineoverthelifeoftheproject.thereismorethanonesignchangeinthecashflows.Noneoftheabove.优选文档，供参照！Difficultylevel:EasyTIMINGANDSCALEISSUESWITHINTERNALRATEOFRETURN61.TheelementsthatcauseproblemswiththeuseoftheIRRinprojectsthataremutuallyexclusiveare:thediscountrateandscaleproblems.timingandscaleproblems.thediscountrateandtimingproblems.scaleandreversingflowproblems.timingandreversingflowproblems.Difficultylevel:MediumNETPRESENTVALUEDECISION62.IfthereisaconflictbetweenmutuallyexclusiveprojectsduetotheIRR,oneshould:dropthetwoprojectsimmediately.spendmoremoneyongatheringinformation.dependontheNPVasitwillalwaysprovidethemostvalue.dependontheAARbecauseitdoesnotsufferfromthesesameproblems.Noneoftheabove.Difficultylevel:MediumPROFITABILITYINDEX63.Theprofitabilityindexistheratioof:presentvalueofcashflowstoaverageaccountingreturn.presentvalueofcashflowstoinitialinvestmentcost.Difficultylevel:EasyINVESTMENTDECISIONRULES64.Whichofthefollowingstatementistrue?OnemustknowthediscountratetocomputetheNPVofaprojectbutonecancomputetheIRRwithoutreferringtothediscountrate.OnemustknowthediscountratetocomputetheIRRofaprojectbutonecancomputetheNPVwithoutreferringtothediscountrate.Paybackaccountsfortimevalueofmoney.TherewillalwaysbeoneIRRregardlessofcashflows.Averageaccountingreturnistheratiooftotalassetstototalnetincome.Difficultylevel:MediumCAPITALBUDGETINGPRACTICE优选文档，供参照！65.GrahamandHarvey(2001)foundthat___and___werethetwomostpopularcapitalbudgetingmethods.InternalRateofReturn;PaybackPeriodInternalRateofReturn;NetPresentValueNetPresentValue;PaybackPeriodModifiedInternalRateofReturn;InternalRateofReturnModifiedInternalRateofReturn;NetPresentValueDifficultylevel:MediumPROBLEMSNETPRESENTVALUE66.Whatisthenetpresentvalueofaprojectwiththefollowingcashflowsandarequiredreturnof12percent?YearCashFlow-$28,900$12,450$19,630$2,750-$287.22-$177.62$177.62$204.36$287.22Difficultylevel:EasyNETPRESENTVALUE67.Whatisthenetpresentvalueofaprojectthathasaninitialcashoutflowof$12,670andthefollowingcashinflows?Therequiredreturnis11.5percent.YearCashInflows$4,375$0$8,750$4,100$218.68$370.16$768.20$1,249.65$1,371.02Difficultylevel:EasyNETPRESENTVALUEb68.Aprojectwillproducecashinflowsof$1,750ayearforfouryears.Theproject优选文档，供参照！initiallycosts$10,600togetstarted.Inyearfive,theprojectwillbeclosedandasaresultshouldproduceacashinflowof$8,500.Whatisthenetpresentvalueofthisprojectiftherequiredrateofreturnis13.75percent?-$5,474.76-$1,011.40-$935.56$1,011.40$5,474.76Difficultylevel:EasyNETPRESENTVALUE69.Youareconsideringthefollowingtwomutuallyexclusiveprojectsthatwillnotberepeated.Therequiredrateofreturnis11.25percentforprojectAand10.75percentforprojectB.Whichprojectshouldyouacceptandwhy?YearProjectAProjectB0-$48,000-$126,9001$18,400$69,7002$31,300$80,9003$11,700$0projectA;becauseitsNPVisabout$335morethantheNPVofprojectBprojectA;becauseithasthehigherrequiredrateofreturnprojectB;becauseithasthelargesttotalcashinflowprojectB;becauseitreturnsallitscashflowswithintwoyearsprojectB;becauseitisthelargestsizedprojectDifficultylevel:MediumNETPRESENTVALUE70.Youareconsideringtwomutuallyexclusiveprojectswiththefollowingcashflows.Willyourchoicebetweenthetwoprojectsdifferiftherequiredrateofreturnis8percentratherthan11percent?Ifso,whatshouldyoudo?YearProjectAProjectB0-$240,000-$198,0001$0$110,8002$0$82,5003$325,000$45,000yes;SelectAat8percentandBat11percent.yes;SelectBat8percentandAat11percent.yes;SelectAat8percentandselectneitherat11percent.no;Regardlessoftherequiredrate,projectAalwayshasthehigherNPV.no;Regardlessoftherequiredrate,projectBalwayshasthehigherNPV.Difficultylevel:MediumINTERNALRATEOFRETURN优选文档，供参照！b71.Whatistheinternalrateofreturnonaninvestmentwiththefollowingcashflows?YearCashFlow0-$123,4001$36,2002$54,8003$48,1005.93percent5.96percent6.04percent6.09percent6.13percentDifficultylevel:EasyINTERNALRATEOFRETURN72.Aninvestmenthasthefollowingcashflows.Shouldtheprojectbeacceptedifithasbeenassignedarequiredreturnof9.5percent?Whyorwhynot?YearCashFlow0-$24,0001$8,0002$12,0003$9,000yes;becausetheIRRexceedstherequiredreturnbyabout0.39percentyes;becausetheIRRislessthantherequiredreturnbyabout3.9percentyes;becausetheIRRispositiveno;becausetheIRRexceedstherequiredreturnbyabout3.9percentno;becausetheIRRis9.89percentDifficultylevel:MediumINTERNALRATEOFRETURNANDNETPRESENTVALUE73.Youareconsideringtwoindependentprojectswiththefollowingcashflows.Therequiredreturnforbothprojectsis10percent.Giventhisinformation,whichoneofthefollowingstatementsiscorrect?YearProjectAProjectB0-$950,000-$125,0001$330,000$55,0002$400,000$50,0003$450,000$50,000YoushouldacceptprojectBsinceithasthehigherIRRandrejectprojectAbecauseyoucannotacceptbothprojects.YoushouldacceptprojectAbecauseithasthelowerNPVandrejectprojectB.YoushouldacceptprojectAbecauseithasthehigherNPVandyoucannotacceptbothprojects.YoushouldacceptprojectBbecauseithasthehigherIRRandrejectprojectA.优选文档，供参照！e.YoushouldacceptbothprojectsifthefundsareavailabletodososincebothNPV’sare>0.Difficultylevel:MediumINTERNALRATEOFRETURN74.Youareconsideringaninvestmentwiththefollowingcashflows.Iftherequiredrateofreturnforthisinvestmentis13.5percent,shouldyouacceptitbasedsolelyontheinternalrateofreturnrule?Whyorwhynot?YearCashFlow0-$12,0001$5,5002$8,0003-$1,500yes;becausetheIRRexceedstherequiredreturnyes;becausetheIRRisapositiverateofreturnno;becausetheIRRislessthantherequiredreturnno;becausetheIRRisanegativerateofreturnYoucannotapplytheIRRruleinthiscasebecausetherearemultipleIRRs.Difficultylevel:MediumPROFITABILITYINDEX75.Whatistheprofitabilityindexforaninvestmentwiththefollowingcashflowsgivena9percentrequiredreturn?YearCashFlow0-$21,5001$7,4002$9,8003$8,900a..96b..981.001.021.04Difficultylevel:EasyPROFITABILITYINDEX76.Basedontheprofitabilityindex(PI)rule,shouldaprojectwiththefollowingcashflowsbeacceptedifthediscountrateis8percent?Whyorwhynot?YearCashFlow0-$18,6001$10,0002$7,300优选文档，供参照！3$3,700yes;becausethePIis1.008yes;becausethePIis.992yes;becausethePIis.999no;becausethePIis1.008no;becausethePIis.992Difficultylevel:MediumPROFITABIILITYINDEX77.Youareconsideringtwoindependentprojectsbothofwhichhavebeenassignedadiscountrateof8percent.Basedontheprofitabilityindex,whatisyourrecommendationconcerningtheseprojects?ProjectAProjectBYearCashFlowYearCashFlow0-$38,5000-$42,0001$20,0001$10,0002$24,0002$40,000YoushouldacceptbothprojectssincebothoftheirPIsarepositive.YoushouldacceptprojectAsinceithasthehigherPI.YoushouldacceptbothprojectssincebothoftheirPIsaregreaterthan1.YoushouldonlyacceptprojectBsinceithasthelargestPIandthePIexceeds1.Neitherprojectisacceptable.Difficultylevel:MediumPROFITABILITYINDEXd78.Youwouldliketoinvestinthefollowingproject.YearCashFlow-$55,000$30,000$37,000Victoria,yourboss,insiststhatonlyprojectsthatcanreturnatleast$1.10intodaydollarsforevery$1investedcanbeaccepted.Shealsoinsistsonapplyinga10percentdiscountratetoallcashflows.Basedonthesecriteria,youshould:accepttheprojectbecauseitreturnsalmost$1.22forevery$1invested.accepttheprojectbecauseithasapositivePI.accepttheprojectbecausetheNPVis$2,851.rejecttheprojectbecausethePIis1.05.rejecttheprojectbecausetheIRRexceeds10percent.Difficultylevel:ChallengePAYBACKPERIOD优选文档，供参照！c79.Itwillcost$2,600toacquireasmallicecreamcart.Cartsalesareexpectedtobe$1,400ayearforthreeyears.Afterthethreeyears,thecartisexpectedtobeworthlessasthatistheexpectedremaininglifeofthecoolingsystem.Whatisthepaybackperiodoftheicecreamcart?a..86years1.46years1.86years2.46years2.86yearsDifficultylevel:EasyPAYBACKPERIOD80.Youareconsideringaprojectwithaninitialcostof$4,300.Whatisthepaybackperiodforthisprojectifthecashinflowsare$550,$970,$2,600,and$500ayearoverthenextfouryears,respectively.2.04years2.36years2.89years3.04years3.36yearsDifficultylevel:EasyPAYBACKPERIOD81.Aprojecthasaninitialcostof$1,900.Thecashinflowsare$0,$500,$900,and$700overthenextfouryears,respectively.Whatisthepaybackperiod?2.71years2.98years3.11years3.71yearsneverDifficultylevel:EasyPAYBACKPERIOD82.Jackisconsideringaddingtoystohisgeneralstore.Heestimatesthatthecostofinventorywillbe$4,200.Theremodelingexpensesandshelvingcostsareestim