Finance 300

Difference between initial cost and market value is called net present value
The length of time a firm must wait to recoup, in present value terms, the money it has in invested in a project is referred to as the payback period
The length of time a firm must wait to recoup the money it has invested in a project is called the payback period
A project’s average net income divided by its average book value is referred to as the project’s average accounting return
The internal rate of return is defined as the discount rate, which causes the net present value of a project to equal zero
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? 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 have multiple rates of return
If a firm accepts Project A it will not be feasible to also accept Project B because both projects would require the simultaneous and exclusive use of the same piece of machinery. These projects are considered to be mutually exclusive
A project has a net present value of zero. Which one of the following best describes this project? The project’s cash inflows equal its cash outflows in current dollar terms
Which one of the following will decrease the net present value of a project? increasing the project’s initial cost at time zero
If a project has a net present value equal to zero, then increasing the project’s initial cost at time zero
Net present value is the best method of analyzing mutually exclusive projects
Which of the following are advantages of the payback method of project analysis II. liquidity biasIII. ease of use
Which one of the following correctly applies to the average accounting rate of return? It can be compared to the return on assets ratio
Which one of the following is an advantage of the average accounting return method of analysis? easy availability of information needed for the computation
Which of the following are considered weaknesses in the average accounting return method of project analysis? I. exclusion of time value of money considerationsII. need of a cutoff rateIV. based on accounting values
Which one of the following statements related to the internal rate of return (IRR) is correct? The IRR is equal to the required return when the net present value is equal to zero.
Which of the following are definite indicators of an accept decision for an independent project with conventional cash flows? I. positive net present valueIII. internal rate of return greater than the required rate
Mutually exclusive projects are best defined as competing projects which: both require the total use of the same limited resource.
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 project’s: incremental cash flows
The option that is foregone so that an asset can be utilized by a specific project is referred to as which one of the following? opportunity cost
Which one of the following best describes the concept of erosion? the cash flows of a new project that come at the expense of a firm’s existing cash flows
The annual annuity stream of payments that has the same present value as a project’s costs is referred to as which one of the following? equivalent annual cost
the stand-alone principle advocates that project analysis should be based solely on which one of the following costs? incremental
Which one of the following best illustrates erosion as it relates to a hot dog stand located on the beach? selling fewer hot dogs because hamburgers were added to the menu
Changes in the net working capital requirements can affect the cash flows of a project every year of the project’s life.

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