2. Preference decisions compare potential projects that meet screening decision criteria and will be ranked in their preference order to differentiate between alternatives with respect to all of the following characteristics EXCEPT

a. importance

b. desirability

c. feasibility

d. political prominence

4. You are explaining time value of money factors to your friend. Which factor would you explain as being larger?

a. neither one is larger because they are equal

b. there is not enough information given to answer this question

c. The future value of $1 for 12 periods at 6% is larger

d. the present value of $1 for 12 periods at 6% is larger

6. You want to invest $8,000 at an annual interest rate of 8% that compounds annually for 12 years. Which table will help you determine the value of your account at the end of 12 years?

a. future value of an ordinary annuity

b. present value of an ordinary annuity

c. future value of one dollar ($1)

d. present value of one dollar (1$)

8. Grummet Company is acquiring a new wood lathe with a cash purchase price of $80,000. The Wood Master Industries ( the manufacturer) has agreed to accept $23,500 at the end of each year for the next 4 years. Based on this deal, how much interest will Grummet pay over the life of the loan?

a. $23,500

b. $94,000

c. $14,000

d. $80,000

10. The process of reinvesting interest earned to generate additional earnings over time is ________________________________.

a. annuity

b. compounding

c. discounting

d. lump-sum

12. Which of the following does not assign a value to a business opportunity using time-value measurement tools?

a. internal rate of return (IRR) method

b. payback period method

c. net present value (NPV)

d. discounted cash flow model

14. This calculation determines profitability or growth potential of an investment, expressed as a percentage, at the point where NPV equals zero.

a. new present value (NPV)

b. internal rate of return (IRR) method

c. discounted cash flow method

d. future value method