1. What is the NPV (Net Present Value) of a project that has an initial cost of $400m, and expected to have $20m a year in net revenues for the next thirty years, if the appropriate required return is 5%?

Question 1 options:

A) $400m

B) -$307.45

C) - $92.55m

D) $0

E) $2,981.94

Question 2(4 points)

2. What is the IRR (Internal Rate of Return) of a project that has an initial cost of $130m, and expected to have $35m a year in net revenues for the next four years?

Question 2 options:

A) 2.845%

B) 3.032%

C) multiple IRR

D) 6%

E) 10%

Question 3(4 points)

3.Which of the following should not be included in cash flows (CFFA) for capital budgeting projects?

Question 3 options:

A)Opportunity cost

B)Interest Expense

C)Taxes

D)Changes to Net Working Capital

E)Side Effects (such as erosion or complementarities)

Question 4(4 points)

4.The value of a previously purchased building that can be sold which the firm plans to use in a proposed project is an example of a(n)

Question 4 options:

A)sunk cost

B)opportunity cost

C)erosion cost

D)fixed cost

E)none of the above

Question 5(4 points)

5.Cash flows from assets for capital budgeting purposes are the same as the Cash Flow Statements developed for accounting records.

Question 5 options:

TrueFalse

Question 6(4 points)

6.The shortcoming(s) of the average accounting return (AAR) method is (are)

Question 6 options:

A)the use of net income instead of cash flows.

B)the pattern of income flows has no impact on the AAR number.

C)there is not a theoretically derived cutoff rate.

D)it uses book value accounting.

E) All of the above are shortcomings.

Question 7(4 points)

7.If the cash flows for a project change signs more than once, then the IRR criterion may fail to identify an acceptable project because of the ____________ problem.

Question 7 options:

A) Multiple rate-of-return

B) net income

C) mutually exclusive project

D) independent investment project

E) trial-n-error process