ch9 rev answers 
1. A project has an initial cost of $27,400 and a market value of $32,600. What is the difference between these two values called?
A. net present value
B. internal return
C. payback value
D. profitability index
E. discounted payback
3. The length of time a firm must wait to recoup the money it has invested in a project is called the:
A. internal return period.
B. payback period.
C. profitability period.
D. discounted cash period.
E. valuation period.
5. A project's average net income divided by its average book value is referred to as the project's average:
A. net present value.
B. internal rate of return.
C. accounting return.
D. profitability index.
E. payback period.
6. The internal rate of return is defined as the:
A. maximum rate of return a firm expects to earn on a project.
B. rate of return a project will generate if the project in financed solely with internal funds.
C. discount rate that equates the net cash inflows of a project to zero.
D. discount rate which causes the net present value of a project to equal zero.
E. discount rate that causes the profitability index for a project to equal zero.
25. Applying the discounted payback decision rule to all projects may cause:
A. some positive net present value projects to be rejected.
B. the most liquid projects to be rejected in favor of the less liquid projects.
C. projects to be incorrectly accepted due to ignoring the time value of money.
D. a firm to become more long-term focused.
E. some projects to be accepted which would otherwise be rejected under the payback rule.
50. In actual practice, managers frequently use the: I. average accounting return method because the information is so readily available.
II. internal rate of return because the results are easy to communicate and understand.
III. discounted payback because of its simplicity.
IV. net present value because it is considered by many to be the best method of analysis.
A. I and III only
B. II and III only
C. I, II, and IV only
D. II,
A. net present value
B. internal return
C. payback value
D. profitability index
E. discounted payback
3. The length of time a firm must wait to recoup the money it has invested in a project is called the:
A. internal return period.
B. payback period.
C. profitability period.
D. discounted cash period.
E. valuation period.
5. A project's average net income divided by its average book value is referred to as the project's average:
A. net present value.
B. internal rate of return.
C. accounting return.
D. profitability index.
E. payback period.
6. The internal rate of return is defined as the:
A. maximum rate of return a firm expects to earn on a project.
B. rate of return a project will generate if the project in financed solely with internal funds.
C. discount rate that equates the net cash inflows of a project to zero.
D. discount rate which causes the net present value of a project to equal zero.
E. discount rate that causes the profitability index for a project to equal zero.
25. Applying the discounted payback decision rule to all projects may cause:
A. some positive net present value projects to be rejected.
B. the most liquid projects to be rejected in favor of the less liquid projects.
C. projects to be incorrectly accepted due to ignoring the time value of money.
D. a firm to become more long-term focused.
E. some projects to be accepted which would otherwise be rejected under the payback rule.
50. In actual practice, managers frequently use the: I. average accounting return method because the information is so readily available.
II. internal rate of return because the results are easy to communicate and understand.
III. discounted payback because of its simplicity.
IV. net present value because it is considered by many to be the best method of analysis.
A. I and III only
B. II and III only
C. I, II, and IV only
D. II,