Question

37.      Which of the following is a likely errors in the calculation of net present value?

a.	the amount of cash flows
b.	the timing of cash flows
c.	the discount rate.
d.	all of the above

        

38.      Which statement is trueconcerning depreciation?

a.	Depreciation does not affect taxable income.
b.	Depreciation should be considered in the cash flow analysis.
c.	Depreciation is never relevant for decision making.
d.	Depreciation is never affected by income tax laws.

39.      Which of the following is a useful feature of spreadsheet programs?

a.	Spreadsheet programs reduce the errors in predicting the amounts of future cash flows.
b.	Spreadsheet programs reduce the errors in predicting the timing of future cash flows.
c.	Spreadsheet programs reduce the errors in predicting the discount rate.
d.	Spreadsheet programs help the user see the effect on the net present value of changes in assumptions and estimates.

           

40.      Which of the following is the discount rate that equates the net present value of a series of cash flows to zero?

a.	investment rate of return.
b.	external rate of return.
c.	internal rate of return.
d.	international rate of return.

41.      Which of the following can be calculated using built-in functions in spreadsheet programs?

a.	external rate of return.
b.	internal rate of return.
c.	investment rate of return.
d.	international rate of return.

Answer 1

Answer 37-

Option 'd' is correct. Any of the given options i.e. cash flows, timing and discount rate can cause errors in computation of net present value.

Answer 38-

Option 'd' is correct. Depreciation is computed in accordance with Corporate laws and is unaffected by income tax laws.

Answer 39-

Option 'd' is correct. Spreadsheet can ease the process of seeing the effect on the net present value with changes in assumptions and estimates with help of formulas and copy paste or drag operations.

Answer 40-

Option 'c' is correct. Internal Rate of Return is the discount rate that equates present value of cash inflows and present value of cash outflows i.e. make net present value equal to Zero.

Answer 41-

Option 'c' is correct. Spreadsheet has the in built function of Internal Rate of Return.