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The length of time a firm must wait to recoup,in present value terms,the money it has in invested in a project is referred to as the:


A) net present value period.
B) internal return period.
C) payback period.
D) discounted profitability period.
E) discounted payback period.

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An investment project provides cash flows of $1,190 per year for 10 years.If the initial cost is $8,000,what is the payback period?


A) 3.36 years
B) 5.28 years
C) 6.72 years
D) 8.13 years
E) never

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-Home Décor & More is considering a proposed project with the following cash flows.Should this project be accepted based on the combination approach to the modified internal rate of return if both the discount rate and the reinvestment rate are 16 percent? Why or why not? A) Yes;The MIRR is 14.78 percent. B) Yes;The MIRR is 17.42 percent. C) No;The MIRR is 12.91 percent. D) No;The MIRR is 14.78 percent. E) No;The MIRR is 17.42 percent. -Home Décor & More is considering a proposed project with the following cash flows.Should this project be accepted based on the combination approach to the modified internal rate of return if both the discount rate and the reinvestment rate are 16 percent? Why or why not? -Home Décor & More is considering a proposed project with the following cash flows.Should this project be accepted based on the combination approach to the modified internal rate of return if both the discount rate and the reinvestment rate are 16 percent? Why or why not? A) Yes;The MIRR is 14.78 percent. B) Yes;The MIRR is 17.42 percent. C) No;The MIRR is 12.91 percent. D) No;The MIRR is 14.78 percent. E) No;The MIRR is 17.42 percent.


A) Yes;The MIRR is 14.78 percent.
B) Yes;The MIRR is 17.42 percent.
C) No;The MIRR is 12.91 percent.
D) No;The MIRR is 14.78 percent.
E) No;The MIRR is 17.42 percent.

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You are considering a project with an initial cost of $7,500.What is the payback period for this project if the cash inflows are $1,100,$1,640,$3,800,and $4,500 a year over the next four years,respectively?


A) 3.21 years
B) 3.28 years
C) 3.36 years
D) 4.21 years
E) 4.29 years

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-An investment has the following cash flows and a required return of 13 percent.Based on IRR,should this project be accepted? Why or why not? A) No;The IRR exceeds the required return by about 0.06 percent. B) No;The IRR is less than the required return by about 1.53 percent. C) Yes;The IRR exceeds the required return by about 0.06 percent. D) Yes;The IRR exceeds the required return by about 1.53 percent. E) Yes;The IRR is less than the required return by about 0.06 percent. -An investment has the following cash flows and a required return of 13 percent.Based on IRR,should this project be accepted? Why or why not? -An investment has the following cash flows and a required return of 13 percent.Based on IRR,should this project be accepted? Why or why not? A) No;The IRR exceeds the required return by about 0.06 percent. B) No;The IRR is less than the required return by about 1.53 percent. C) Yes;The IRR exceeds the required return by about 0.06 percent. D) Yes;The IRR exceeds the required return by about 1.53 percent. E) Yes;The IRR is less than the required return by about 0.06 percent.


A) No;The IRR exceeds the required return by about 0.06 percent.
B) No;The IRR is less than the required return by about 1.53 percent.
C) Yes;The IRR exceeds the required return by about 0.06 percent.
D) Yes;The IRR exceeds the required return by about 1.53 percent.
E) Yes;The IRR is less than the required return by about 0.06 percent.

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Explain how the internal rate of return (IRR)decision rule is applied to projects with financing type cash flows.

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For financing type projects,the decision...

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The length of time a firm must wait to recoup the money it has invested in a project is called the:


A) internal return period.
B) payback period.
C) profitability period.
D) discounted cash period.
E) valuation period.

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The internal rate of return is defined as the:


A) maximum rate of return a firm expects to earn on a project.
B) rate of return a project will generate if the project in financed solely with internal funds.
C) discount rate that equates the net cash inflows of a project to zero.
D) discount rate which causes the net present value of a project to equal zero.
E) discount rate that causes the profitability index for a project to equal zero.

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-You are analyzing a project and have gathered the following data: Based on the net present value of _____,you should _____ the project. A) -$2,030.75;reject B) -$1,995.84;reject C) -$283.60;accept D) $3,283.60;accept E) $4,109.37;accept -You are analyzing a project and have gathered the following data: -You are analyzing a project and have gathered the following data: Based on the net present value of _____,you should _____ the project. A) -$2,030.75;reject B) -$1,995.84;reject C) -$283.60;accept D) $3,283.60;accept E) $4,109.37;accept Based on the net present value of _____,you should _____ the project.


A) -$2,030.75;reject
B) -$1,995.84;reject
C) -$283.60;accept
D) $3,283.60;accept
E) $4,109.37;accept

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Consider the following two mutually exclusive projects: Consider the following two mutually exclusive projects: What is the crossover rate for these two projects? A) 8.22 percent B) 8.48 percent C) 8.71 percent D) 8.75 percent E) 8.94 percent What is the crossover rate for these two projects?


A) 8.22 percent
B) 8.48 percent
C) 8.71 percent
D) 8.75 percent
E) 8.94 percent

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The final decision on which one of two mutually exclusive projects to accept ultimately depends upon which one of the following?


A) initial cost of each project
B) timing of the cash inflows
C) total cash inflows of each project
D) required rate of return
E) length of each project's life

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What is the net present value of a project with the following cash flows if the required rate of return is 9 percent? What is the net present value of a project with the following cash flows if the required rate of return is 9 percent? A) -$1,574.41 B) -$1,208.19 C) $5,904.65 D) $6,029.09 E) $6,311.16


A) -$1,574.41
B) -$1,208.19
C) $5,904.65
D) $6,029.09
E) $6,311.16

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-A project will produce cash inflows of $2,800 a year for 4 years with a final cash inflow of $5,700 in year 5.The project's initial cost is $9,500.What is the net present value of this project if the required rate of return is 16 percent? A) -$311.02 B) $1,048.75 C) $4,650.11 D) $9,188.98 E) $11,168.02 -A project will produce cash inflows of $2,800 a year for 4 years with a final cash inflow of $5,700 in year 5.The project's initial cost is $9,500.What is the net present value of this project if the required rate of return is 16 percent?


A) -$311.02
B) $1,048.75
C) $4,650.11
D) $9,188.98
E) $11,168.02

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Which one of the following is the best example of two mutually exclusive projects?


A) building a retail store that is attached to a wholesale outlet
B) producing both plastic forks and spoons on the same assembly line at the same time
C) using an empty warehouse to store both raw materials and finished goods
D) promoting two products during the same television commercial
E) waiting until a machine finishes molding Product A before being able to mold Product B

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If a firm accepts Project A it will not be feasible to also accept Project B because both projects would require the simultaneous and exclusive use of the same piece of machinery.These projects are considered to be:


A) independent.
B) interdependent.
C) mutually exclusive.
D) economically scaled.
E) operationally distinct.

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-You are analyzing a project and have gathered the following data: Based on the profitability index of _____ for this project,you should _____ the project. A) 0.93;accept B) 1.02;accept C) 1.10;accept D) 0.93;reject E) 1.10;reject -You are analyzing a project and have gathered the following data: -You are analyzing a project and have gathered the following data: Based on the profitability index of _____ for this project,you should _____ the project. A) 0.93;accept B) 1.02;accept C) 1.10;accept D) 0.93;reject E) 1.10;reject Based on the profitability index of _____ for this project,you should _____ the project.


A) 0.93;accept
B) 1.02;accept
C) 1.10;accept
D) 0.93;reject
E) 1.10;reject

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-What is the profitability index for an investment with the following cash flows given a 14.5 percent required return? A) 0.94 B) 0.98 C) 1.02 D) 1.06 E) 1.11 -What is the profitability index for an investment with the following cash flows given a 14.5 percent required return? -What is the profitability index for an investment with the following cash flows given a 14.5 percent required return? A) 0.94 B) 0.98 C) 1.02 D) 1.06 E) 1.11


A) 0.94
B) 0.98
C) 1.02
D) 1.06
E) 1.11

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Tedder Mining has analyzed a proposed expansion project and determined that the internal rate of return is lower than the firm desires.Which one of the following changes to the project would be most expected to increase the project's internal rate of return?


A) decreasing the required discount rate
B) increasing the initial investment in fixed assets
C) condensing the firm's cash inflows into fewer years without lowering the total amount of those inflows
D) eliminating the salvage value
E) decreasing the amount of the final cash inflow

Correct Answer

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Blue Water Systems is analyzing a project with the following cash flows.Should this project be accepted based on the discounting approach to the modified internal rate of return if the discount rate is 14 percent? Why or why not? Blue Water Systems is analyzing a project with the following cash flows.Should this project be accepted based on the discounting approach to the modified internal rate of return if the discount rate is 14 percent? Why or why not? A) Yes;The MIRR is 13.48 percent. B) Yes;The MIRR is 17.85 percent. C) Yes;The MIRR is 21.23 percent. D) No;The MIRR is 5.73 percent. E) No;The MIRR is 17.85 percent.


A) Yes;The MIRR is 13.48 percent.
B) Yes;The MIRR is 17.85 percent.
C) Yes;The MIRR is 21.23 percent.
D) No;The MIRR is 5.73 percent.
E) No;The MIRR is 17.85 percent.

Correct Answer

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The internal rate of return is:


A) the discount rate that makes the net present value of a project equal to the initial cash outlay.
B) equivalent to the discount rate that makes the net present value equal to one.
C) tedious to compute without the use of either a financial calculator or a computer.
D) highly dependent upon the current interest rates offered in the marketplace.
E) a better methodology than net present value when dealing with unconventional cash flows.

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