Homework Answers
The answer is
2) Negative Net Present value
Project with negative NPV should be rejected
Project should be accepted when Payback period is shorter than required, NPV is positive, IRR is greater than cost of capital, profitability index is greater than 1
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Which one of the following indicates that a project should be rejected? O1) Payback period that...
Which one of the following indicates that a project is definitely acceptable? A. Profitability index greater than...
Which one of the following indicates that a project is definitely acceptable? A. Profitability index greater than 1.0 B. Negative net present value C. Modified internal rate return that is lower than the requirement D. Zero internal rate of return E. Positive average accounting return
A project should be accepted when the: Select one: a. Payback period is greater than the...
A project should be accepted when the: Select one: a. Payback period is greater than the prescribed number of years. O b. IRR exceeds the required rate. O c. Net present value is negative. O d. AAR is less than the targeted AAR. Oe. Profitability index is less than 1.0.
18. Which of the following is NOT true about the internal rate of return: A) A...
18. Which of the following is NOT true about the internal rate of return: A) A good project is one with IRR greater than the required return. B) IRR is the discount rate that results in a zero net present value for the project. C) Crossover rate for two projects is the IRR of the project with the difference of the cash flows of the two projects.. D) For two projects of the same size, IRR will usually choose the...
Which one of the following statements is correct? Assume cash flows are conventional. Explain how you...
Which one of the following statements is correct? Assume cash flows are conventional. Explain how you got your answer A. If two projects are mutually exclusive, you should select the project with the shortest payback period. B. The profitability index will be greater than 1.0 when the net present value is negative. C. Projects with conventional cash flows may sometimes have multiple internal rates of return. D. If the required return exceeds IRR, the profitability index will be less than...
17. If the profitably index for a project exceeds 1, then the project's net present value...
17. If the profitably index for a project exceeds 1, then the project's net present value is positive a. b. internal rate of return is less than the projects's disount rate. payback period is less than 5 years. d. c. Accounting rate of return is greater than the project's rate of return. 18. If a project's profitability index is less than 1, the project's a. discount rate is above its cost of capital. b. Internal rate of return is less...
Which of the following statements are correct? I. A positive net present value signals an accept...
Which of the following statements are correct? I. A positive net present value signals an accept decision. II. Projects should be accepted when the profitability index is greater than 1. III. A payback period that is less than the required period signals an accept decision. IV. When the internal rate of return exceeds the required return, a project should be accepted.
Use the following information to answer questions 16 through 20. You are analyzing a proposed project...
Use the following information to answer questions 16 through 20. You are analyzing a proposed project and have compiled the following information Year Cash flow 0 $145,000 1 $33,400 $ 70,500 $ 82,100 Required payback period 3 years Required return 9.50 percent 16. What is the net present value of the proposed project? a. S6,239.12 b. 58.221.29 c. S6,831.84 d. 58,376.91 17. Should the project be accepted based on the internal rate of return (IRRY? Why or why not? a....
A company plans to pay an annual dividend of $1.30 a share for two years commencing...
A company plans to pay an annual dividend of $1.30 a share for two years commencing two years from today. After that time, a constant $2 a share annual dividend is planned indefinitely. Given a required return of 12 percent, what is the current value of this stock? Please explain how you received the answer show your work. A. $14.32 B. $9.65 C. $8.15 D. $5.58 E. $5.25 Which one of the following statements is correct? Assume cash flows are...
Splash City is considering purchasing a water park in Atlanta, Georgia, for $1,910,000. The new facility...
Splash City is considering purchasing a water park in Atlanta, Georgia, for $1,910,000. The new facility will generate annual net cash inflows of $472,000 for eight years. Engineers estimate that the facility will remain useful for eight years and have no residual value. The company uses straight-line depreciation, and its stockholders demand an annual return of 10% on investments of this nature. Requirement 1. Compute the payback, the ARR, the NPV, the IRR, and the profitability index of this investment....
1. We can get multiple IRRS when we draw an NPV profile for a project when:...
1. We can get multiple IRRS when we draw an NPV profile for a project when: a. The project is riskless. b. The project requires a large investment. c. The project cash flows are uneven and change in sign. d. The project has a balloon payment. e. The opportunity cost of capital is high. 2. The length of time required for an investment to generate cash flows sufficient to recover its initial cost, without taking into account time value of...
A project should be accepted when the: Select one: a. Payback period is greater than the prescribed number of years. O b. IRR exceeds the required rate. O c. Net present value is negative. O d. AAR is less than the targeted AAR. Oe. Profitability index is less than 1.0.
18. Which of the following is NOT true about the internal rate of return: A) A good project is one with IRR greater than the required return. B) IRR is the discount rate that results in a zero net present value for the project. C) Crossover rate for two projects is the IRR of the project with the difference of the cash flows of the two projects.. D) For two projects of the same size, IRR will usually choose the...
17. If the profitably index for a project exceeds 1, then the project's net present value is positive a. b. internal rate of return is less than the projects's disount rate. payback period is less than 5 years. d. c. Accounting rate of return is greater than the project's rate of return. 18. If a project's profitability index is less than 1, the project's a. discount rate is above its cost of capital. b. Internal rate of return is less...
Use the following information to answer questions 16 through 20. You are analyzing a proposed project and have compiled the following information Year Cash flow 0 $145,000 1 $33,400 $ 70,500 $ 82,100 Required payback period 3 years Required return 9.50 percent 16. What is the net present value of the proposed project? a. S6,239.12 b. 58.221.29 c. S6,831.84 d. 58,376.91 17. Should the project be accepted based on the internal rate of return (IRRY? Why or why not? a....
1. We can get multiple IRRS when we draw an NPV profile for a project when: a. The project is riskless. b. The project requires a large investment. c. The project cash flows are uneven and change in sign. d. The project has a balloon payment. e. The opportunity cost of capital is high. 2. The length of time required for an investment to generate cash flows sufficient to recover its initial cost, without taking into account time value of...
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