Projects A and B are mutually exclusive and have an initial cost of $82,000 each. Project A provides cash inflows of $34,000 per year for three years while Project B produces a cash inflow of $115,000 in Year 3. Which project(s) should be accepted if the discount rate is 11.7 percent? What if the discount rate is 13.5 percent?

Multiple Choice

• Accept both at 11.7 percent and neither at 13.5 percent

• Accept A at both discount rates

• Accept B at both discount rates

• Accept A at 11.7 percent and neither at 13.5 percent

• Accept B at 11.7 percent and neither at 13.5 percent

• Ducazau Shipping has 700,000 shares outstanding, which are trading for $23.63 per share. Using the firms required rate of return of 17 percent, a project has an NPV of $202,000. All else constant, if the project is accepted, the stock price per share would be expected to:

  Multiple Choice

• rise to 23.88.

• rise to $23.92.

• fall to $19.62.

• fall to $23.34.

• rise to $27.65.

• TipTop Property Management is considering a project that has an NPV of $18,500, an IRR of 13.2 percent, and a payback period of 3.2 years. The required return is 12.8 percent and the required payback period is 3.0 years. Which one of the following statements correctly applies to this project?

  Multiple Choice

• The payback rule will automatically be ignored since both the net present value and the internal rate of return indicate an accept decision.

• Payback indicates acceptance.

• The payback decision rule could override the accept decision indicated by the net present value if liquidity is a primary concern.

• The net present value indicates accept while the internal rate of return indicates reject.

• The net present value decision rule is the only rule that matters when making the final decision.