1. Refer to the Table below. If the company is choosing one of the above mutually exclusive projects (Project A or Project B), given a discount rate of 8%, which should the company choose? Project A Project B Time 0 -10,000 -10,000 Time 1 5,000 4,000 Time 2 4,000 3,000 Time 3 3,000 10,000 a. Project B b. Both projects - both have positive NPV. c. Neither project - both have negative NPV. d. Project A

Which of the following is NOT a valid method of modifying cash flows to produce a MIRR?

a.

Leave the initial cash flow alone and compound all of the remaining cash flows to the final period of the project.

b.

Turn multiple negative cash flows into a single negative cash flow by summing all negative cash flows over the project's lifetime.

c.

Discount all of the negative cash flows to time 0 and leave the positive cash flows alone.

d.

Discount all of the negative cash flows to the present and compound all of the positive cash flows to the end of the project.

Which of the following decision rules might best be used as a supplement to net present value (NPV) by a firm that favors liquidity?

a.

equivalent annual annuity

b.

MIRR

c.

profitability index

d.

payback period

Which of the following is NOT a limitation of the payback period rule?

a.

It is difficult to calculate.

b.

It does not account for changes in the discount rate.

c.

It ignores cash flows after payback.

d.

It does not account for the time value of money.

Which of the following situations can lead to IRR giving a different decision than NPV?

a.

All of the above can lead to IRR giving a different decision than NPV

b.

Delayed investment

c.

Multiple IRRs

d.

Differences in project scale

Which of the following best describes the Net Present Value rule?

	a.	If the difference between the present cost of an investment and the present value (PV) of its benefits after a fixed number of years is positive the investment should be taken, otherwise it should be rejected.
	b.	When choosing among any list of investment opportunities where resources are limited, always choose those projects with the highest net present value (NPV).
	c.	Take any investment opportunity where the net present value (NPV) exceeds the opportunity cost of capital; turn down any opportunity where the cost of capital exceeds the net present value (NPV)
	d.	Take any investment opportunity where the net present value (NPV) is not negative; turn down any opportunity when it is negative.