1. Which of the following statements is true about the internal rate of return (IRR)?

a.If the IRR is less than the required rate of return, the project is deemed acceptable.

b.If the IRR is greater than the required rate of return, the firm is indifferent between accepting or rejecting the investment proposal.

c.If the IRR is less than the required rate of return, the firm is indifferent between accepting or rejecting the investment proposal.

d.If the IRR is greater than the required rate, the project is deemed acceptable.

2. An investment is expected to produce annual cash flows $8,000 every year for 5 years. Assuming a discount rate of 8%, the present value of this series of cash flows is _____. (Round your answer to two decimal places.)

Period	1	2	3	4	5
8%	0.92593	0.85734	0.79383	0.73503	0.68058

a.$32,857.53

b.$29,866.67

c.$31,941.68

d.$39,852.23

3. Which of the following statements is a limitation of a postaudit?

a.A postaudit faces the limitation that the assumptions driving the original analysis may often be invalidated by changes in the actual operating environment.

b.A postaudit does not suggest any corrective actions that can be taken if the overall outcome of the investment is negative.

c.A postaudit does not ensure that resources are used wisely when evaluating the profitability of a project.

d.A postaudit's objective is not achieved if it is done by an independent party.

4. Assume that Paradise Peach Hotel, a hotel chain, is planning to open its hotel in a new location. It is assumed that the project will produce net cash inflows of $1,100,000 at the end of each of the next 5 years and its internal rate of return is 8%. Calculate the initial investment for the project. (The present value of annuity of 8% for 5 years is 3.99271.)

a.$8,783,962

b.$6,695,200

c.$2,973,400

d.$4,391,981

5. Which of the following compounding interest formula is used for computing amounts for n periods into the future? (F= Future value; P= Present value of a future outlay; i = Interest rate)

a.F = P(1 + i)ⁿ

b.F = P(1 / i)ⁿ

c.F = P(1 i)ⁿ

d.F = P(1 i)ⁿ