11.

A company is considering two projects.

	Project A	Project B
Initial investment	$200,000	$200,000
Cash inflow Year 1	$50,000	$90,000
Cash inflow Year 2	$50,000	$90,000
Cash inflow Year 3	$50,000	$40,000
Cash inflow Year 4	$50,000	$30,000
Cash inflow Year 5	$50,000	$30,000

What is the payback period for Project A?

A)3.5 years B)2.5 years C)4.5 year D)5 years E)4 years

15.

Which of the following is true regarding the internal rate of return for a project?

A)Managers may believe (in most cases, incorrectly) that the internal rate of return is the compounded rate of return earned by the initial investment B)If the internal rate of return is equal to the required rate of return, the net present value of the project is zero. C)all of these D)If the internal rate of return is less than the required rate of return, the project will be rejected. E)If the internal rate of return is more than the required rate of return, the project will be accepted.

17.

Which of the following is a disadvantage of postaudits?

A)They may point to the need for additional funding for the project. B)They evaluate profitability rather than cash flows. C)The assumptions driving the original analysis may be invalidated by changes in the actual operating environment. D)All of these. E)They tend to hold managers accountable for capital investment decision making.

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