Question
17. Which one of the following will decrease net working capital of a firm? A) a decrease in accounts payable B) a decrease in inventory
17. Which one of the following will decrease net working capital of a firm?
A) a decrease in accounts payable
B) a decrease in inventory
C) an increase in accounts receivable
D) an increase in the firms checking account balance
E) a decrease in fixed assets
18. You are considering a project with the following data: Internal rate of return: 8.7 percent Profitability ratio: 0.98 Net present value (NPV): -$393 Payback period: 2.44 years Required return: 9.5 percent Which one of the following is correct given this information?
A) The discount rate used in computing the net present value must have been less than 8.7 percent.
B) The discounted payback period will have to be less than 2.44 years.
C) The discount rate used to compute the profitability ratio was equal to the internal rate of return.
D) This project should be accepted based on the profitability ratio.
E) This project should not be accepted based on the internal rate of return.
F) (A) and (B) are correct.
19. There is a project that requires an initial investment of $10,000 and is expected to generate a cash flow of $11,500 in 1 year. Its life is 1 year. The firm has already paid $1,000 to do a research for the project. The firms required return is 10%. What is the NPV of this project and is this project acceptable?
A) $454; Yes
B) -$545; No
C) -$454; No
D) $500; Yes
E) $1,500; Yes
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