Which of the following are definite indicators of an accept decision for an independent project with conventional cash flows?
I. positive net present value
II. profitability index greater than zero
III. internal rate of return greater than the required rate
IV. positive internal rate of return
Which of the following statements is correct given this information?
I. The discount rate used in computing the net present value was less than 11.63 percent.
II. The discounted payback period must be less than 2.98 years.
III. The discount rate used in the computation of the profitability ratio was 11.63 percent.IV. This project should be accepted as the internal rate of return exceeds the required return.
project with cash flows and the following characteristics: IRR =11.63%, Prof. ratio=1.04, NPV =$987, Payback Period=2.98 yrs
Which of the statements is correct?
I. The dis. rate used in comp. the NPV was less than 11.63 percent.
II. The dis payback period must be less than 2.98 years. III. The disc rate used in the comp of the prof ratio was 11.63 percent.
IV. This project should be accepted as the internal rate of return exceeds the required return.
The payback decision rule could override the accept decision indicated by the net present value.
In actual practice, managers frequently use the:
I. average accounting return method because the information is so readily available.
II. internal rate of return because the results are easy to communicate and understand.
III. discounted payback because of its simplicity.net present value because it is considered by many to be the best method of analysis.
Question Southern Chicken is considering two projects. Project A consists of creating an outdoor eating area on the unused portion of the restaurant's property. Project B would use that outdoor space for creating a drive-thru service window. When trying to decide which project to accept, the firm should rely most heavily on which one of the following analytical methods?
waiting until a machine finishes molding Product A before being able to mold Product B
assumes the firm has sufficient funds to undertake both projects
net present value
Which of the following statements generally apply to the cash flows of a financing type project?
I. nonconventional cash flows
II. cash outflows exceed cash inflows prior to any time value adjustments
III. cash for services rendered is received prior to the cash that is spent providing the services
IV. the total of all cash flows must equal zero on an unadjusted basis
I, II, and III only
a cash inflow at time zero
Which of the following statements related to the internal rate of return (IRR) are correct?
I. The IRR method of analysis can be adapted to handle non-conventional cash flows.
II. The IRR that causes the net present value of the differences between two project's cash flows to equal zero is called the crossover rate.
III. The IRR tends to be used more than net present value simply because its results are easier to comprehend.IV. Both the timing and the amount of a project's cash flows affect the value of the project's IRR.
I, II, III, and IV
Which of the following are considered weaknesses in the average accounting return method of project analysis?
I. exclusion of time value of money considerations
II. need of a cutoff rate
III. easily obtainable information for computationbased on accounting values
Which one of the following correctly applies to the average accounting rate of return?
A project has a discounted payback period that is equal to the required payback period. Given this, which of the following statements must be true?
I. The project must also be acceptable under the payback rule.
II. The project must have a profitability index that is equal to or greater than 1.0.
III. The project must have a zero net present value.
IV. The project's internal rate of return must equal the required return.
Samuelson Electronics has a required payback period of three years for all of its projects. Currently, the firm is analyzing two independent projects. Project A has an expected payback period of 2.8 years and a net present value of $6,800. Project B has an expected payback period of 3.1 years with a net present value of $28,400. Which projects should be accepted based on the payback decision rule?
Which of the following are advantages of the payback method of project analysis?
I. works well for research and development projects
II. liquidity bias
III. ease of use
IV. arbitrary cutoff point
Which one of the following is a project acceptance indicator given an independent project with investing type cash flows?
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?
Which one of the following methods determines the amount of the change a proposed project will have on the value of a firm?
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?
The net present value of the project is zero.
The equivalent annual cost considers which of the following?
I. required rate of return
II. operating costs
III. need for replacement
IV. aftertax salvage value
When using the equivalent annual cost as a basis for deciding which equipment should be purchased, the equipment under consideration must fit which two of the following criteria?
I. differing productive lives
II. differing manufacturers
III. required replacement at end of economic life
IV. differing initial cost
The top-down approach to computing the operating cash flow:
Pro forma statements for a proposed project should:
I. be compiled on a stand-alone basis.
II. include all the incremental cash flows related to the project.
III. generally exclude interest expense.IV. include all project-related fixed asset acquisitions and disposals.
All of the following are related to a proposed project. Which of these should be included in the cash flow at time zero?
I. purchase of $1,400 of parts inventory needed to support the project
II. loan of $125,000 used to finance the project
III. depreciation tax shield of $1,100
IV. $6,500 of equipment needed to commence the project
Which of the following should be included in the analysis of a new product?
I. money already spent for research and development of the new product
II. reduction in sales for a current product once the new product is introduced
III. increase in accounts receivable needed to finance sales of the new product
IV. market value of a machine owned by the firm which will be used to produce the new product
Which one of the following is an example of a sunk cost?
The stand-alone principle advocates that project analysis should be based solely on which one of the following costs?
Danielle's is a furniture store that is considering adding appliances to its offerings. Which of the following should be considered incremental cash flows of this project?
I. utilizing the credit offered by a supplier to purchase the appliance inventory
II. benefiting from increased furniture sales to appliance customers
III. borrowing money from a bank to fund the appliance project
IV. purchasing parts for inventory to handle any appliance repairs that might be necessary
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:
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