Top of Form<\/p>\n
1.<\/p>\n
The difference between the present value of an investment?s future cash flows and its initial cost is the:<\/p>\n
net present value.<\/p>\n
internal rate of return.<\/p>\n
payback period.<\/p>\n
profitability index.<\/p>\n
discounted payback period.<\/p>\n
References<\/b><\/p>\n
Multiple Choice<\/b>Section: 5.1 Net Present Value and Other Investment Rules<\/p>\n
2.<\/p>\n
Which statement concerning the net present value (NPV) of an investment or a financing project is correct?<\/p>\n
A financing project should be accepted if, and only if, the NPV is exactly equal to zero.<\/p>\n
An investment project should be accepted only if the NPV is equal to the initial cash flow.<\/p>\n
Any type of project should be accepted if the NPV is positive and rejected if it is negative.<\/p>\n
Any type of project with greater total cash inflows than total cash outflows, should always be accepted.<\/p>\n
An investment project that has positive cash flows for every time period after the initial investment should be accepted.<\/p>\n
References<\/b><\/p>\n
Multiple Choice<\/b>Section: 5.1 Net Present Value and Other Investment Rules<\/p>\n
3.<\/p>\n
The primary reason that company projects with positive net present values are considered acceptable is that:<\/p>\n
they create value for the owners of the firm.<\/p>\n
the project’s rate of return exceeds the rate of inflation.<\/p>\n
they return the initial cash outlay within three years or less.<\/p>\n
the required cash inflows exceed the actual cash inflows.<\/p>\n
the investment’s cost exceeds the present value of the cash inflows.<\/p>\n
References<\/b><\/p>\n
Multiple Choice<\/b>Section: 5.1 Net Present Value and Other Investment Rules<\/p>\n
4.<\/p>\n
Accepting a positive net present value (NPV) project:<\/p>\n
indicates the project will pay back within the required period of time.<\/p>\n
means the present value of the expected cash flows is equal to the project\u2019s cost.<\/p>\n
ignores the inherent risks within the project.<\/p>\n
guarantees all cash flow assumptions will be realized.<\/p>\n
is expected to increase the stockholders\u2019 value by the amount of the NPV.<\/p>\n
References<\/b><\/p>\n
Multiple Choice<\/b>Section: 5.1 Net Present Value and Other Investment Rules<\/p>\n
5.<\/p>\n
The net present value method of capital budgeting analysis does all of the following except:<\/p>\n
incorporate risk into the analysis.<\/p>\n
consider all relevant cash flow information.<\/p>\n
use all of a project’s cash flows.<\/p>\n
discount all future cash flows.<\/p>\n
provide a specific anticipated rate of return.<\/p>\n
References<\/b><\/p>\n
Multiple Choice<\/b>Section: 5.1 Net Present Value and Other Investment Rules<\/p>\n
6.<\/p>\n
What is the net present value of a project with an initial cost of $36,900 and cash inflows of $13,400, $21,600, and $10,000 for Years 1 to 3, respectively? The discount rate is 13 percent.<\/p>\n
\u2212$287.22<\/p>\n
\u2212$1,195.12<\/p>\n
\u2212$1,350.49<\/p>\n
$204.36<\/p>\n
$797.22<\/p>\n
References<\/b><\/p>\n
Multiple Choice<\/b>Section: 5.1 Net Present Value and Other Investment Rules<\/p>\n
7.<\/p>\n
References<\/b><\/p>\n
Worksheet<\/b>Section: 5.2 The Payback Period Method<\/p>\n
8.<\/p>\n
References<\/b><\/p>\n
Worksheet<\/b>Section: 6.2 The Baldwin Company: An Example<\/p>\n
9.<\/p>\n
References<\/b><\/p>\n
Worksheet<\/b>Section: 6.1 Incremental Cash Flows: The Key to Capital BudgetingSection: 6.2 The Baldwin Company: An Example<\/p>\n","protected":false},"excerpt":{"rendered":"
Top of Form 1. The difference between the present value of an investment?s future cash flows and its initial cost is the: net present value. internal rate of return. payback period. profitability index. discounted payback period. References Multiple ChoiceSection: 5.1 Read More …<\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[],"tags":[],"class_list":["post-121370","post","type-post","status-publish","format-standard","hentry"],"_links":{"self":[{"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/posts\/121370","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/comments?post=121370"}],"version-history":[{"count":0,"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/posts\/121370\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/media?parent=121370"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/categories?post=121370"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/tags?post=121370"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}