Question

If a project has a net present value equal to zero, then:

Group of answer choices the project earns a return exactly equal to the discount rate.

the total of the cash inflows must equal the initial cost of the project.

a decrease in the project's initial cost will cause the project to have a negative NPV.

any delay in receiving the projected cash inflows will cause the project to have a positive NPV.

the project's PI must be also be equal to zero.

Answer #1

**NPV = 0 happens when the discount rate is the IRR and it is the rate at which the CFs are reinvested. So the first statement is true.**- The sum of PV of all CF inflows should equal the sum of PV of all CF outflows. So the second statement is not entirely correct.
- If NPV is 0 at the current rate, then the decrease in the rate will lead to a positive NPV.So the third statement is not correct.
- Delay in CFs will reduce the PV so the so the NPV is negative.So the fourth statement is not correct.
- PI = 1+ NPV/initial investment. If NPV = 0 then the PI = 1 so the fifth statement is not correct.

When the present value of the cash inflows exceeds the initial
cost of a project, then the project should be
Group of answer choices
accepted because the internal rate of return is positive
accepted because the profitability index is less than 1.
accepted because the profitability index is negative.
accepted because IRR is higher than the discount rate.
rejected because the net present value is negative

Choose the most accurate statement regarding the net present
value of an investment or
a financing project:
A) A financing project should be accepted if, and only if, the
NPV is exactly equal to zero.
B) An investment project should be accepted only if the NPV is
equal to the initial cash
flow.
C)Any type of project should be accepted if the NPV is positive
and rejected if it is negative
D) An investment project that has positive cash flows...

Which one of the following statements is correct? Net present
value is equal to an investment's cash inflows discounted to
today's dollars. The net present value is positive when the
required return exceeds the internal rate of return. The net
present value is a measure of profits expressed in today's dollars.
If the internal rate of return equals the required
return, the net present value will equal
zero. If the initial cost of a project is increased, the
net present...

All else constant, the net present value of a typical investment
project increases when:
Group of answer choices
The cost of capital increases.
Each cash inflow is delayed by one year.
The initial investment of a project increases.
The cost of capital decreases.
All cash inflows occur during the last year of a project’s life
instead of periodically throughout the life of the project.

Which of the following statements is CORRECT? Assume that the
project being considered has normal cash flows, with one outflow
followed by a series of inflows.
Group of answer choices
The lower the cost of capital used to calculate a project's NPV,
the lower the calculated NPV will be.
If a project's NPV is less than zero, then its IRR must be less
than the cost of capital.
If a project's NPV is greater than zero, then its IRR must...

11.
The discount rate that makes the net present value of an
investment exactly equal to zero is the:
A)
Payback period.
B)
Internal rate of return.
C)
Average accounting return.
D)
Profitability index.
E)
Discounted payback period.
12.
The internal rate of return (IRR) rule can be best stated
as:
A)
An investment is acceptable if its IRR is exactly equal to its
net present value (NPV).
B)
An investment is acceptable if its IRR is exactly equal to...

What will be the net present value of a project that provides
net cash flow of $20,000 at the end of the first year, $7,000 at
the end of the second year, and $13,000 at the end of the third
year? The initial cost is $8,000 and the appropriate discount rate
is 10%.
Tophill Corporation is considering a project that will pay
$10,000 at the end of the first year, $22,000 at the end of the
second year, and $40,000...

(Net present value calculation) Big Steve's, makers of
swizzle sticks, is considering the purchase of a new plastic
stamping machine. This investment requires an initial outlay of
$95,000 and will generate net cash inflows of $19,000 per year
for 11 years.
a. What is the project's NPV using a discount rate of 9
percent? Should the project be accepted? Why or why not?
b. What is the project's NPV using a discount rate of 13
percent? Should the project be...

(Related to Checkpoint 11.1) (Net present value
calculation) Dowling Sportswear is considering building a new
factory to produce aluminum baseball bats. This project would
require an initial cash outlay of $5,500,000 and would generate
annual net cash inflows of $1,100,000 per year for 7 years.
Calculate the project's NPV using a discount rate of 5
percent.
If the discount rate is 5 percent, then the project's NPV is
$_______. (Round to the nearest dollar.)

The net present value (NPV) method estimates how much a
potential project will contribute to ____ and it
is the best selection criterion. The _____ the
NPV, the more value the project adds; and added value means a ____
stock price.
CFt is the expected cash flow at Time t, r is the
project's risk-adjusted cost of capital, and N is its life, and
cash outflows are treated as negative cash flows. The NPV
calculation assumes that cash inflows can...

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