11. An annuity is:

a. a series of payments of equal amount, paid at irregular time intervals.b. a series of payments of unequal amount, paid at regular time intervals.c. a series of payments of equal amount, paid at regular time intervals.d. a lump sum payment paid at a regular time interval.

12. Present value is the amount which, if invested:

a. in the future at a given rate of return, will provide a specified future amount. b. now at an unknown rate of return, will provide a specified future amount. c. in the future at a given rate of return, will provide a specified future amount. d. now at a given rate of return, will provide a specified future amount.

13. A present value factor is the

a. opposite of a future value factor. b. reciprocal of a future value factor. c. negative of a future value factor. d. difference of future value factor from one.

14. Management is considering replacing an old machine with a more efficient machine. Which statement is false?

a. The machine with the lowest present value of cash outflows will be selected.b. Any difference in working capital should be considered.c. The machine with the lower time- adjusted rate of return will be selected.d. The machine' salvage value should be considered.

15. The time- adjusted rate of return is the:

a. same as the minimum rate of return.b. discount rate that yields a positive net present value when used to find the present value of a project's cash flows.c. same as the adjusted discount rate.d. discount rate that yields a zero net present value when used to find present value of a project' cash flows.

16. If a project generates a net present value of zero, the profitability index for the project will

a. equal zero.c. equal -1.b. equal 1.d. be undefined

17. If the profitability index for a project exceeds 1, then the project's

a. net present value is positive.b. internal rate of return is more than the project's discount rate.c. payback period is less than 5 years.d. accounting rate of return is greater than the project's internal rate of return.

18. In deciding whether to replace a machine, which of the following is NOT a sunk cost?

a. The expected resale price of the existing machine.b. The depreciated cost of the existing machine.c. The book value of the existing machine.d. The original cost of the existing machine.

19. Which of the following does not affect the net present value of an investment proposal?

a. The timing of the future cash flowsc. opportunity costs b. the cost of the investment d. the discount rate used by the investor.

20. The present value of an old machine is zero. If instead, the salvaged value of the old machine was P20, 000, what would be the impact on the net present value of the proposal to purchase a new machine?

a. It would increase the net present value of the proposal.b. It would decrease the net present value of the proposal.c. It would not affect the net present value of the proposal.d. Potentially it could increase or decrease the net present value of the new machine.