Thank you for your help. Here is another set of questions. There will be two more that I will send directly to you. Thanks again for your help.

chonne

If you were trying to decrease a project's net present value, you would be Select one: a. increasing the value of each of the project's discounted cash inflows b. moving each of the cash inflows forward to a sooner time period c. decreasing the required discount rate d. increasing the project's initial cost at time zero e. increasing the amount of the final cash inflow 1 If you were asked to manage a capital budgeting project, you would consider which of the following? I. project start-up costs II. timing of all projected cash flows III. dependability of future cash flows IV. dollar amount of each projected cash flow Select one: a. I and IV only b. I, II, and IV only c. I, II, and III only d. II, III, and IV only e. I, II, III, and IV 1 You are considering a project but you realize this project has a net present value of zero. Based on this info, which of the following is true? Select one: a. the total of the cash inflows must equal the initial cost of the project. b. the project earns a return exactly equal to the discount rate. c. a decrease in the project's initial cost will cause the project to have a negative NPV d. any delay in receiving the projected cash inflows will cause the project to have a positive NPV. e. the project's PI must be also be equal to zero. 1 FMC Technologies is considering a project that requires $2,380,000 of fixed assets. When the project ends, those assets are expected to have an after-tax salvage value of $145,000. How is the $145,000 salvage value handled when computing the net present value of the project? Select one: a. reduction in the cash outflow at time zero b. cash inflow in the final year of the project c. cash inflow for the year following the final year of the project d. cash inflow prorated over the life of the project e. not included in the net present value You are tasked with choosing between three projects. The net present values of these projects are: Project NPV 1 -$168 2 $0 3 $172 You should: Select one: a. accept Projects 1 and 2 and reject Project 3 b. reject all projects c. accept Project 3 and reject Projects 1 and 2 d. accept Projects 2 and 3 and reject Project 1 1 What is the NPV for the following project if its cost of capital is 15 percent and it's initial after tax cost is $6,000,000 and it is expected to provide after-tax operating cash inflows of $1,800,000 in year 1, $1,900,000 in year 2, $1,700,000 in year 3 and $1,600,000 in year 4? Select one: a. $371,764 b. ($965,527) c. ($137,053) d. ($1,034,511) 1 A company has the opportunity to choose between Project X and Project Y . Project X costs $500 and has cash inflow of $400 in each of the next 2 years. Project Y also costs $500, and generates cash flows of $500 and $325 for the next 2 years, respectively. Which investment should the firm choose if the cost of capital is 25 percent? Select one: a. Project X b. Project Y c. Neither d. Not enough information to tell 1 Your company just informed you that they have a cost of capital of 14 percent and request that you evaluate three capital projects. The internal rates of return are as follows: Project Internal Rate of Return 1 12% 2 15% 3 13% Your recommendation is to Select one: a. accept Projects 2 and 3 and reject Project 1 b. accept Project 2 and reject Projects 1 and 3 c. accept Project 3 and reject Projects 1 and 2 d. accept Project 1 and reject Projects 2 and 3 1 The rate of return a company is required to earn on any investment in order to maintain the market value of its stock. Select one: a. internal rate of return b. gross profit margin c. cost of capital d. net present value When considering internal rate of return (IRR), which statement(s) is/are correct? I. The IRR method of analysis can be adapted to handle non-conventional cash flows. II. The IRR that causes the net present value of the differences between two project's cash flows to equal zero is called the crossover rate. III. The IRR tends to be used more than net present value simply because its results are easier to comprehend. IV. Both the timing and the amount of a project's cash flows affect the value of the project's IRR. Select one: a. I and II only b. III and IV only c. I, II and III only d. II, III, and IV only e. I, II, III, and IV 1 You have been asked to consider a project with the following characteristics: Internal rate of return: 11.63% Profitability ratio: 1.04 Net present value: $987 Payback period: 2.98 years Which of the following statements is correct given this information? I. The discount rate used in computing the net present value was less than 11.63 percent. II. The discounted payback period must be more than 2.98 years. III. The discount rate used in the computation of the profitability ratio was 11.63 percent. IV. This project should be accepted as the internal rate of return exceeds the required return. Select one: a. I and II only b. III and IV only c. I, II and IV only d. II, III and IV only e. I, II, III and IV 1 An investment has the following cash flows and a required return of 14 percent. Based on IRR, should this project be accepted? Why or why not? Year 0: -$42,000 Year 1: $15,300 Year 2: $28,400 Year 3: $7,500 Select one: a. No; The IRR exceeds the required return by about 0.06 percent. b. No; the IRR exceeds the required return by about 1.53 percent. c. No; The IRR is less than the required return by about 2.53 percent d. Yes; The IRR exceeds the required return by about 2.53 percent e. Yes; The IRR is less than the required return by about 0.06 percent 1 You are given the following cash flows. If you assume a 14.5 percent required return, what is the profitability index? Year 0 -$46,500 Year 1 $12,200 Year 2 $38,400 Year 3 $11,300 Select one: a. 0.94 b. 0.98 c. 1.02 d. 1.06 e. 1.11 1 You are considering the purchase of a Ben & Jerrys booth. This booth will cost $9,000. Sales are expected to be $3,600 per year for the next 3 years. After the three years, the value is expected to be zero. What is the payback period? Select one: a. 1.48 b. 1.67 c. 1.91 d. 2.0 e. 2.5 Next The internal rate of return Select one: a. May produce multiple rates of return when cash flows are conventional b. Is best used when comparing mutually exclusive projects c. Is rarely used in the business world today d. Is principally used to evaluate small dollar projects e. Is easy to understand 1 Johnson Mirrors is facing the possibility of two mutually exclusive projects. They have determined that the required rate for similar projects is 11.7 percent. Project A has an internal rate of return (IRR) of 15.3 percent and Project B has an IRR of 16.5 percent. Given this information, which one of the following statements is correct? Select one: a. Project A should be accepted as its IRR is closer to the crossover point than is Project B's IRR. b. Project B should be accepted as it has the higher IRR. c. Both projects should be accepted as both of the project's IRRs exceed the crossover rate. d. Neither project should be accepted since both of the project's IRRs exceed the crossover rate. e. You cannot determine which project should be accepted given the information provided. When the initial cost of a project is less than the present value of the cash inflows, then the project should be: Select one: a. accepted because the internal rate of return is positive. b. accepted because the profitability index is greater than 1. c. accepted because the profitability index is negative. d. rejected because the internal rate of return is negative. e. rejected because the net present value is negative. 1 Which two methods of project analysis are the most biased towards short-term projects? Select one: a. net present value and internal rate of return b. internal rate of return and profitability index c. payback and discounted payback d. net present value and discounted payback e. discounted payback and profitability index 1 If the internal rate of return is equal to or greater than $0, the project should be accepted. Select one: True Or false