Net Present Value and Correct Answer
uestion 1 (Worth 1 points)
Which of the following NOT correct?
Independent or non-mutually exclusive alternatives can be accepted at the same time.
The modified internal rate of return assumes that inflow are reinvested at 80 percent of the internal rate of return
This is a correct answer
It is the difference in the reinvestment assumptions that can be significant in determining when to use the present value or internal rate of return methods.
Under the net present value method, cash flows are assumed to be reinvested at the firm 's weighted average cost of capital
Points earned on this question: 1
Question 2 (Worth 1 points)
A project has initial costs of $3,000 and subsequent cash inflows in years 1 – 4 of $1350, 275, 875, and 1525. The company 's cost of capital is 10%. Calculate IRR for this project.
10.00%
11.75%
12.25%
This is a correct answer
13.15%
Points earned on this question: 0
Question 3 (Worth 1 points)
The Internal Rate of Return of a capital investment…
Changes when the cost of capital changes
Is equal to the annual net cash flows divided by one half of the project’s cost when the cash flows are an annuity
Must exceed the cost of capital in order for the firm to accept the investment
This is a correct answer
None of the above options are correct
Points earned on this question: 0
Question 4 (Worth 1 points)
A project has initial costs of $3,000 and subsequent cash inflows in years 1 – 4 of $1350, 275, 875, and 1525. The company 's cost of capital is 10%. Calculate NPV for this project.
$154
This is a correct answer
$174
$275
$325
Points earned on this question: 0
Question 5 (Worth 1 points)
An appropriate capital budgeting process requires that the following steps are taken in which order?
a) collection of data
b) reevaluation and adjustment
c) evaluation and decision making
d) search for and discovery of investment opportunities
Which of the following NOT correct?
Independent or non-mutually exclusive alternatives can be accepted at the same time.
The modified internal rate of return assumes that inflow are reinvested at 80 percent of the internal rate of return
This is a correct answer
It is the difference in the reinvestment assumptions that can be significant in determining when to use the present value or internal rate of return methods.
Under the net present value method, cash flows are assumed to be reinvested at the firm 's weighted average cost of capital
Points earned on this question: 1
Question 2 (Worth 1 points)
A project has initial costs of $3,000 and subsequent cash inflows in years 1 – 4 of $1350, 275, 875, and 1525. The company 's cost of capital is 10%. Calculate IRR for this project.
10.00%
11.75%
12.25%
This is a correct answer
13.15%
Points earned on this question: 0
Question 3 (Worth 1 points)
The Internal Rate of Return of a capital investment…
Changes when the cost of capital changes
Is equal to the annual net cash flows divided by one half of the project’s cost when the cash flows are an annuity
Must exceed the cost of capital in order for the firm to accept the investment
This is a correct answer
None of the above options are correct
Points earned on this question: 0
Question 4 (Worth 1 points)
A project has initial costs of $3,000 and subsequent cash inflows in years 1 – 4 of $1350, 275, 875, and 1525. The company 's cost of capital is 10%. Calculate NPV for this project.
$154
This is a correct answer
$174
$275
$325
Points earned on this question: 0
Question 5 (Worth 1 points)
An appropriate capital budgeting process requires that the following steps are taken in which order?
a) collection of data
b) reevaluation and adjustment
c) evaluation and decision making
d) search for and discovery of investment opportunities