1.The higher the risk of an investment project, the ________ for the project.

A.	higher the expected rate of return
B.	lower the expected rate of return
C.	lower the minimum desired rate of return
D.	higher the minimum desired rate of return

2.The net present value of a project is zero. The minimum desired rate of return used to obtain the net present value of zero is 8%. Which of the following statements is TRUE?

A.	The project is desirable if the minimum desired rate of return is 10%.
B.	The project is desirable if the minimum desired rate of return is 6% or 10%.
C.	The project is desirable if the minimum desired rate of return is 6%.
D.	The project is undesirable if the minimum desired rate of return is 6%.

3. You can receive $10,000 today or $3,000 per year at the end of each year for the next five years. If the required rate of return is 10%, what option should be selected? (The present value of an ordinary annuity of one at 10% for five periods is 3.7908. The present value of one at 10% for five periods is 0.6209.)

A.	Receive $10,000 today.
B.	Receive $3,000 per year for the next five years.
C.	Neither option is desirable.
D.	The results are the same for both options.

4.Keisha Company is considering the following investment:

Estimated capitalinvestment$300,000

Estimated usefullife3 years

Estimated disposal value in 3years$10,000

Estimated annual savings in cash operating costs(end of year) $130,000

Minimum desired rate ofreturn12%

Present value of ordinary annuity of one, 3 periods at12%2.4018

Present value of one, 3 periods at12%0.7118

Assume straight-line depreciation is used. Ignore income taxes. The net present value of the investment is ________.

A.	$19.352
B.	$100,000
C.	$12,234
D.	$22,234

5.Apple Company pays 15% on the first $50,000 of pretax income and 30% on any additional pretax income. Apple Company currently earns $52,000. An investment under consideration is expected to add $20,000 in pretax income. What is the tax rate on the additional income from the investment?

A.	22.5%
B.	30%
C.	43%
D.	15%

6.A capital investment has a net present value of $1,000.00 at a required rate of return of 10%. At a 12% required rate of return, the net present value of the investment is $100.00. At a 14% required rate of return, the net present value of the investment is $0. The capital investment should be rejected if ________.

A.	the required rate of return is less than 14%
B.	the required rate of return exceeds 12%
C.	the required rate of return exceeds 14%
D.	the required rate of return is less than 12%