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Can you answer questions 1,2,3,4,5? 1) You purchase a run-down home in Albany for $25,000 and spend another $25,000 to repair it. Your total in-cost
Can you answer questions 1,2,3,4,5?
1) You purchase a run-down home in Albany for $25,000 and spend another $25,000 to repair it. Your total in-cost is $50,000. When the work is done, you place the home back on the market and find that it's worth $60,000. What is your NPV? a) Zero b) $10,000 c) $25,000 d) $50,000 e) $60,000 2) What is the difference between an investment's market value and cost? a) Internal Rate of Return (IRR) b) Net Present Value (NPV) c) Capital budgeting process d) Discounted Cash Flow (DCF) e) All of the above 3) As a financial manager, what will you do with an investment if its Net Present Value (NPV) is negative? a) Estimate the cash flows of the business b) Reject the investment c) Accept the investment d) Be agnostic with the investment e) None of the above 4) Which investment technique yields the same result as Net Present Value (NPV)? a) Payback Rule b) Discounted Payback Period c) Internal Rate of Return d) Average Accounting Return e) Profitability Index 5) Which statement is true regarding the Internal Rate of Return (IRR)? a) It is the most important alternative to Net Present Value b) The IRR is a single rate of return which summarizes the merits of the project c) It is the discount rate which makes the Net Present Value of an investment equate to zero d) An investment is acceptable if its IRR exceeds the required retum e) All of the aboveStep by Step Solution
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