Finance 318 Chapter 8

The net present value of an investment represents the difference between the incestment’s cost and its market value
discounted cash flow valuation is the process of discounting an investments future cash flow
the payback period is the length of time it takes an investment to generate sufficient cash flow to enable the project to recoup its initial cost
the average net income of a project divided by the projects average book value is referred to as the projects average accounting return
which one of the following defines the internal rate of return for a project discount rate which results in a zero net present value for the project
the net present value profile illustrates how the net present value of an investment is affected by which one of the following discount rate
the possibility that more than one discount rate can cause the net present value of an investment to equal zero is referred to as multiple rates of return
both project A and B are acceptable as independent projects…. mutually exclusive
which one of the following can be defined as a benefit-cost ratio profitability index
which one of the following indicates that a project is expected to create value for its owners positive net present value
the net present value decreases as the required rate of return increases
which one of the following is generally considered to be the best form of analysis if you have to select a single method to analyze a variety of investment opportunities net present value
which one of the following statements is correct if the internal rate of return equals the required return, the net present value will equal zero
if an investment is producing a return that is equal to the required return the investments net present value will be zero
which one of the following indicates that a project should be rejected profitability index less than 1.0
which one of the following inidators offers the best assurance that a project will produce value for its owners positive npv
which one of the following statements is correct? the payback period ignores the time value of money
payback is best used to evaluate which type of projects low-cost, short-term
which one of the following is the primary advantage of payback analysis ease of use
the payback method of analysis ignores which one of the following time value of money
which one of the following methods of analysis ignore the time value of money payback
which one of the following methods of analysis has the greatest bias towards short term projects payback
which one of the following methods of analysis ignores cash flows average accounting return
which one of the following methods of anaylsis is most similar to computing the return on assets average accounting return
the average accounting return measures profitability rather than cash flow
which one of the analytical methods is based on net income average accounting return
which one of the following is most closely related to the net present value profile internal rate of return
the modified internal rate of return is specifically designed to address the problems associated with which one of the following unconventional cash flows
the reinvestment approach to the modified internal rate of return compounds all the cash flows except for the initial cash flow to the end of the project
which one of the following is specifically designed to compute the rate of return on a project that has unconventional cash flows modified internal rate of return
which one of the following methods of analysis is most appropriate to use when two investments are mutually exculsive net present value
the profitability index reflects the value created per dollar invested
based on the most recent survey information presented in your textbook CFO’s tend to use which 2 methods of investment analysis the most frequently internal rate of return and net present value
Mary has just been asked to analyze an investment to determine if it is acceptable…. net present value
you were recently hired by a firm as a project analyst, the owner of the firm is unfamiliar with financial analysis profitability index
in which one of the following situations would the payback method be the preferred method of analysis investment funds available only for a limited period of time
which one of the following statements is correct the payback method is biased towards short term projects
which one of the following indicated that a project is definitely acceptable profitability index greater than 1.0

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