6 Questions need to be answered for Finance.

1. If a project has NPV = 0, what types of following investors should have received their required rate of return from this project?

(A) Bondholders

(B) Preferred Stockholders

(C) Common Stockholders

(D) None of the above

(E) All of the above

2. Both NPV and IRR assume that the reinvestment rate on cash flows is equal to the cost of capital.

(A) True

(B) False

3. What?s the weakness of the discount payback period?

(A) Provides an indication of a project?s risk and liquidity.

(B) Difficult to understand and calculate.

(C) Ignores the time value of money.

(D) Ignores cash flows occurring after the payback period.

4. For two mutually projects, we assume their NPV profiles cross and the crossover rate is 10%. We assume the require rate of return is r. We use both NPV and IRR methods to analyze the two projects. Which of the following statements is most correct?

(A) If r > 10%, NPV and IRR methods get similar decisions.

(B) If r > 10%, NPV and IRR methods get conflicting decisions.

(C) If r

(D) If r

(E) Both A and D are correct.

5. IRR assumes cash flows are reinvested at IRR but MIRR assumes that cash flows are reinvested at WACC.

(A) True

(B) False

6. A firm is considering an investment project with the following cash flows: Year 0 = -$100,000 (initial costs); Year 1= $40,000; Year 2 =$90,000; and Year 3 = $30,000; and Year 4 = $60,000. The company has a 10% cost of capital. What is the project?s payback period, discounted payback period? NPV? Profitability Index? IRR? and MIRR?

1. If a project has NPV = 0, what types of following investors should have received their required rate of return from this project? (A) Bondholders (B) Preferred Stockholders (C) Common Stockholders (D) None of the above (E) All of the above 2. Both NPV and IRR assume that the reinvestment rate on cash flows is equal to the cost of capital. (A) True (B) False 3. What's the weakness of the discount payback period? (A) Provides an indication of a project's risk and liquidity. (B) Difficult to understand and calculate. (C) Ignores the time value of money. (D) Ignores cash flows occurring after the payback period. 4. For two mutually projects, we assume their NPV profiles cross and the crossover rate is 10%. We assume the require rate of return is r. We use both NPV and IRR methods to analyze the two projects. Which of the following statements is most correct? (A) If r > 10%, NPV and IRR methods get similar decisions. (B) If r > 10%, NPV and IRR methods get conflicting decisions. (C) If r