1. Company A is planning to invest $60,000 in a project and the project will last 5-years. The company uses straight-line depreciation to a zero book value over the life of the project. The projected net income from the project is $2,500, $3,000, $3,500, $4,000, and $4,500 a year for the next five years, respectively. What is the average accounting rate of return?

Select one:

a. 11.67%

b. 12.50%

c. 13.56%

d. 6.10%

2. What is the IRR, if the 20-year project costs $400,000 and annual cash flows of $50,000 in years 1-10 and $35,000 in years 11-20. The company's required rate of return is 10%.

Select one:

a. 12.53%

b. 10.53%

c. 8.53%

d. 9.60%

3. A disadvantage with the average accounting return is the accounting basis of the values used in the computation.

Select one:

True

False

4.A payback period that is less than the required period signals an accept decision. Select one:

True

False

5.A project is accepted if the target AAR exceeds the project ROI.

Select one:

True

False

6. If a project has a net present value equal to zero, then any delay in receiving the projected cash inflows will cause the project to have a negative net present value.

Select one:

True

False

7. If a project has a net present value equal to zero, then the present value of the cash inflows exceeds the initial cost of the project.

Select one:

True

False

8. If a project has a net present value equal to zero, then the project is expected to produce only the minimally required cash inflows to creditors and shareholders

Select one:

True

False

9. The payback calculation takes the time value of money into account.

Select one:

True

False

10.When comparing the payback and discounted payback, the discounted payback is more difficult to compute due to the time value of money.

Select one:

True

False