Question

1. Which of the following statements is correct?

a. A project with conventional cash flows is one with an initial cash outflow followed by one or more cash inflows.

b. The NPV method determines how much the future value of cash inflows exceeds the present value of costs.

c. All the answers are correct.

d. When two projects are independent, accepting one project implicitly eliminates the other.

e. Conventional cash flow patterns could lead to conflicting decisions by NPV and IRR.

2. Which of the following statements is incorrect?

a. The NPV makes it possible to correctly choose between mutually exclusive projects.

b. Projects may be independent because they are substitutes for one another or because the firm has a funding constraint.

c. The NPV method tells us the amount by which the benefits from a capital expenditure exceed its costs.

d. Most of the answers are correct except one.

e. The decision criterion for the accounting rate of return is inconsistent with the goal of shareholder wealth maximization.

3. Which of the following statements is incorrect?

a. If the NPV is positive, the project should be accepted because all projects with a positive NPV will increase the value of the firm.

b. If a capital project has a positive NPV, the value of the cash flows the project is expected to generate exceeds the project's cost.

c. The NPV uses the discounted cash flow valuation technique to adjust for the time value of money.

d. The accounting rate of return (ARR) provides a direct (dollar) measure of how much a capital project will increase the value of the firm.

e. Most of the answers are correct except one.

Answer #1

**Answer 1**

**Option A
-**** **A project with
conventional cash flows is one with an initial cash outflow
followed by one or more cash inflows.

**Note - All other options are incorrect.**

**Answer 2**

**Option B
-** Projects may be independent because
they are substitutes for one another or because the firm has a
funding constraint.

**Note - All other options are correct**

**Answer 3**

**Option D
-** The accounting rate of return (ARR)
provides a direct (dollar) measure of how much a capital project
will increase the value of the firm.

**Note - All other options are correct**

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. a. The IRR calculation implicitly
assumes that all cash flows are reinvested at the WACC. b. If a
project has normal cash flows and its IRR exceeds its WACC, then
the project’s NPV must be positive. c. If Project A has a higher
IRR than Project B, then Project A must also have a...

Considering IRR and MIRR, which of the following
statements is/are correct?
MIRR considers all the cash flows and time value of
money.
If Project A’s IRR exceeds Project B’ IRR, then A must
have the higher NPV.
Positive MIRR always leads to positive NPV.
Conventional (also known as Normal) cash flows will
result in multiple IRRs.
All of the above, except d, are correct
statements. (I know this answer is wrong, I got marked
off).

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.
a.
The NPVs of relatively risky projects should be found using
relatively low costs of capital.
b.
If a project's NPV is greater than zero, then its IRR must be
less than the cost of capital.
c.
The higher the cost of capital used to calculate the NPV, the
lower the calculated NPV will...

Which of the following statements is correct? Assume the project
being considered has normal cash flows, with one outflow, followed
by a series of inflows:
If a project’s NPV is > 0, the IRR must be less than WACC
The higher the WACC used to calculate NPV, the lower the
calculated NPV will be
The NPV’s of relatively risky projects should be found using
relatively low WACC’s
If a project’s NPV is > 0, the IRR must be less than...

Which of the following statement is correct?
a. A firm should never accept the independent projects having
NPVs greater than zero.
b. All the answers are incorrect.
c. Because the net present value method does not factor in the
time value of money, nor the cash flows after the payback period,
its usefulness is limited.
d. Mutually exclusive projects are the projects that do not have
the same task and therefore they do not compete with each
other.
e. The...

1. Which of the following statements is CORRECT?
A. One problem of the IRR method is that it does not consider
all cash flows of a project.
B. One problem of the IRR method is that it does not take into
account the time value of money.
C. One problem of the IRR method is that it does not consider
the reinvestment of cash inflows.
D. One problem of the IRR method is that a dollar received today
is valued...

You are considering a project with conventional cash flows and
the following characteristics:
Discounted Payback
2.95 Years
NPV
$510,000
IRR
12%
Which of the following statements is correct given this
information?
I.
The discount rate used in computing the net present value was
greater than 12%.
II.
The payback period must be greater than 2.95 years.
III.
This project should be accepted as the NPV is positive.

Which of the
following statements are correct?
a. Consider a
project that generates a negative cash flow in year 0 and a
positive cash flow in year 1. The NPV rule will always lead to the
same decision for this project as the IRR rule.
b. Higher NPV
projects have longer payback periods.
c. Two projects with
identical expected cash flows but different risk profiles have the
same IRR. d. IRR is affected by the scale of the investment
opportunity.

Which of the following statement is correct? Select one:
a. All the answers are incorrect.
b. A positive NPV means that the firm’s value will decrease if
the project is adopted because the new project’s estimated return
is lesst than the firm’s required rate of return.
c. Reject the project if the IRR is greater than or equal to the
required rate of return.
d. Payback period is the discount rate that forces the NPV to
equal zero.
e. All...

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...

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