Question

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 value of that project will also increase.

Answer #1

The first statement is incorrect because net present value is equal to present value of cash inflow less present value of cash outflow. This mean both cash inflow and outflow are considered in today's dollars.

The second statement is incorrect as it is not necessary that NPV would be positive when required return is higher than internal rate of return.

The third statement is incorrect as net present value is measure of net cash generated from investment in today's dollars.

The fifth statement is also incorrect as increase in initial cost of project would decrease net present value and not increase.

The fourth statement is correct that is if internal rate of return is equal to required return then net present value would be zero as internal rate of return is the return at which the cash flows if discounted would result in zero net present value.

**Thus, fourth statement is correct**

When using the Net Present Value method,
A project is acceptable if the present value of benefits equals
the present value of outflows.
A project is acceptable if the present value of benefits exceeds
a specified minimum value.
None of the answers provided is correct
A project is acceptable if the required rate of return on the
project is equal to the cost of the firm’s capital.
Projects with positive net present values increase the value of
the firm.

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...

if the internal rate of return on an investment is positive,
then the investment's net present value must be postive. True or
false and why?

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...

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...

3. Assume that we are analyzing a positive net present value
project. For this project, which measure would be a more
conservative measure of the rate of the return – the internal rate
of return or the modified internal rate of return?

Which of the following statements is correct:
A. projects with unconventional cash flows have multiple
internal rates of return
B. if 2 projects are mutually exclusive, you should select the
project with the shortest payback period
C. If the IRR exceeds the required return, the profitability
index will be less than 1.0
D. the Profitability index will be greater than 1.0 when the net
present value is negative
E. when the internal rate of return is greater than the required...

The value of any financial asset is equal to the net present
value of expected future cash flow derived from the asset,
discounted at:
a. The industry cost of capital
b. The company’s capitalization rate
c. The internal rate of return
d. The investors’ required rate of return

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

The net present value (NPV) and internal rate of return (IRR)
methods of investment analysis are interrelated and are sometimes
used together to make capital budgeting decisions.
Consider the case of Blue Hamster Manufacturing Inc.:
Last Tuesday, Blue Hamster Manufacturing Inc. lost a portion of
its planning and financial data when both its main and its backup
servers crashed. The company’s CFO remembers that the internal rate
of return (IRR) of Project Delta is 11.3%, but he can’t recall how...

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