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Question 5 The profitability index is the ratio of the Onet present value of cash flows to investment future value of cash flows to investment
Question 5 The profitability index is the ratio of the Onet present value of cash flows to investment future value of cash flows to investment O present value of cash flows to IRR Onet present value of cash flows to IRR Question 7 Which of the following methods of evaluating capital investment projects incorporates the time value of money concept? 1) payback period; II) net present value (NPV); III) internal rate of return I and II only I and III only ll and Ill only I, II, and III Question 9 A project will have only one internal rate of return if there is a one-sign change in the cash flows. the net present value is negative. the cash flows decline over the life of the project. the net present value is positive. Question 10 Which of the following statement is FALSE? The payback period rule accepts all projects for which the payback period is greater than the cut-off value. Project X has the following cash flows: CO = +2,200, C1 = -1,100,and C2 = -1,500. If the IRR of the project is 11% and if the cost of capital is 15%, you would accept the project. Project X has the following cash flows: CO = -2,200, C1 = 1,100,and C2 = 1,500. If the IRR of the project is 11% and if the cost of capital is 15%, you would reject the project. Question 13 The main advantage of the payback rule is adjusts for uncertainty of early cash flows. simple to use. does not discount cash flows. Obetter accounts for salvage costs at the end of a project. Question 14 If an investment project (normal project) has an IRR equal to the cost of capital, the NPV for that project is Opositive. zero. negative. unable to determine. Question 15 Which of the following is not the shortcoming of the IRR (internal rate of return) method? It is very cumbersome to evaluate mutually exclusive projects using the IRR method. Projects can have multiple IRRs. IRR cannot distinguish between a borrowing project and a lending project. All of the above are shortcomings of the IRR method. Question 16 , whereas the The net present value method assumes that cash flows are reinvested at the internal rate of return method assumes that cash flows are reinvested at cost of capital; cost of capital cost of capital; internal rate of return internal rate of return; cost of capital internal rate of return; internal rate of return Question 19 Which of the following investment rules may not use all possible cash flows in its calculations? O profitability index NPV O payback period IRR
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