Finance Chapter 9&10 MC

Which one of the following methods of project analysis is defined as computing the value of a project based upon the present value of the project’s anticipated cash flows?a. average accounting returnb. discounted cash flow valuation c. constant dividend growth modeld. expected earnings modele. internal rate of return b. discounted cash flow valuation
The length of time a firm must wait to recoup the money it has invested in a project is called the:a. payback periodb. internal rate of returnc. profitability periodd. valuation periode. discounted cash period a. payback period
Which one of the following will decrease the net present value of a project?a. increasing the amount of the final cash inflowb. increasing the project’s initial cost at time zero c. increasing the value of each of the project’s discounted cash flowsd. decreasing the required rate of returne. moving each of the cash inflows forward to a sooner time period b. increasing the project’s initial cost at time zero
Rossiter Restaurants is analyzing a project that requires $180,000 of fixed assets. When the project ends, those assets are expected to have an aftertax salvage value of $45,000. How is the $45,000 salvage value handled when computing the net present value of the project?a. cash inflow in the final year of the project b. reduction in the cash outflow at time zeroc. not included in the net present valued. cash inflow prorated over the life of the projecte. cash inflow for the year following the final year of the project a. cash inflow in the final year of the project
Why is payback often used as the sole method of analyzing a proposed small project?a. All relevant cash flows are included in the payback analysis.b. Payback considers the time value of money.c. Payback is focused on the long-term impact of a project.d. It is the only method where the benefits of the analysis outweigh the costs of the analysis.e. Payback is the most desirable of the various financial methods of analysis. d. It is the only method where the benefits of the analysis outweigh the costs of the analysis.
The length of time a firm must wait to recoup, in present value terms, the money it has invested in a project is referred to as the:a. discounted profitability periodb. net present value periodc. internal return periodd. payback periode. discounted payback period e. discounted payback period
Which one of the following increases the net present value of a project?a. an increase in the required rate of returnb. an increase in the initial capital requirementc. an increase in the aftertax salvage value of the fixed assets d. a reduction in the final cash inflowe. a deferment of some cash inflows until a later year c. an increase in the aftertax salvage value of the fixed assets
Net present value:Select one:a. is less useful than the profitability index when comparing mutually exclusive projects.b. is less useful than the internal rate of return when comparing different sized projects.c. is the easiest method of evaluation for non-financial managers to use.d. is very similar in its methodology to the average accounting return.e. is the best method of analyzing mutually exclusive projects. e. is the best method of analyzing mutually exclusive projects.
The internal rate of return is defined as the:a. discount rate that causes the profitability index for a project to equal zerob. maximum rate of return a firm expects to earn on a projectc. rate of return a project will generate if the project is financed solely with internal fundsd. discount rate that equates the net cash inflows of a project to zeroe. discount rate which causes the net present value of a project to equal zero e. discount rate which causes the net present value of a project to equal zero
A project has an initial cost of $27,400 and a market value of $32,600. What is the difference between these two values called?a. net present valueb. profitablility indexc. payback valued. internal returne. discounted payback a. net present value
You are viewing a graph that plots the NPVs of a project to various discount rates that could be applied to the project’s cash flows. What is the name given to this graph?Select one:a. project tractb. projected risk profilec. NPV routed. present value sequencee. NPV profile e. NPV profile
There are two distinct discount rates at which a particular project will have a zero net present value. In this situation, the project is said to:a. have operational ambiguityb. have two net present value profilesc. create a mutually exclusive investment decisiond. produce multiple economies of scalee. have multiple rates of return e. have multiple rates of return
Which one of the following methods determines the amount of change a proposed project will have on the value of a firm?a. discounted paybackb. Net present value c. paybackd. internal rate of returne. profitability index b. Net present value
If a project has a net present value equal to zero, then:a. the total of the cash inflows must equal the initial cost of the project.b. the project’s PI must be also equal to zero.c. the project earns a return exactly equal to the discount rate.d. a decrease in the project’s initial cost will cause the project to have a negative NPV>e. any delay in receiving the projected cash inflows will cause the project to have a positive NPV. c. the project earns a return exactly equal to the discount rate.
The fact that a proposed project is analyzed based on the project’s incremental cash flows is the assumption behind which one of the following principles?a. equivalent cost principleb. salvage principlec. fundamental principled. stand-alone principlee. underlying value principle d. stand-alone principle
The difference between a firm’s future cash flows if it accepts a project and the firm’s future cash flows if it does not accept the project is referred to as the projects:a. incremental cash flows b. erosion effectsc. external cash flowd. financing cash flowse. internal cash flow a. incremental cash flows
Which one of the following costs was incurred in the past and cannot be recouped?a. sideb. opportunityc. incrementald. erosione. sunk e. sunk

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