QUESTION 5

1. Which of the following statements is correct?

   		The NPV method does not consider all relevant cash flows, particularly cash flows beyond the payback period.
   		The NPV method assumes that cash flows will be reinvested at the risk-free rate, while the IRR method assumes reinvestment at the IRR.
   		The NPV method assumes that cash flows will be reinvested at the WACC, while the IRR method assumes reinvestment at the IRR.
   		The NPV method assumes that cash flows will be reinvested at the WACC, while the IRR method assumes reinvestment at the risk-free rate.

1 points

QUESTION 6

1. Which of the following is true regarding the payback method?

   		One advantage of the payback method for evaluating potential investments is that it provides the total profit to be earned from a project.
   		One advantage of the payback method for evaluating potential investments is that it provides some information about a projects liquidity and its IRR profile.
   		One advantage of the payback method for evaluating potential investments is that it provides some information about a projects liquidity and risk.
   		One advantage of the payback method for evaluating potential investments is that it provides some information about a projects risk and cash flow from equity.

1 points

QUESTION 7

1. Garvin Enterprises is considering a project that has the following cash flow and WACC data. What is the projects discounted payback?

   	CF
   Initial investment	(1,050.00)
   Cash flow-yr-1	510.00
   Cash flow-yr-2	510.00
   Cash flow-yr-3	510.00
   WACC	9.0%

   		2.50 yrs
   		1.80 yrs
   		2.06 yrs
   		2.35 yrs

1 points

QUESTION 8

1. Edmondson Electric Systems is considering a project that has the following cash flow and WACC data. What is the projects NPV?

   	WACC:	8.00%
   	Year:	0	1	2	3
   	Cash flows:	$1,070	$550	$550	$550

   		$347.40
   		$327.80
   		$365.90
   		$319.50