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chap 5 questions from online

chap 5 questions from online - CHAPTER 9 Net Present Value...

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CHAPTER 9 Net Present Value and Other Investment Criteria I. DEFINITIONS NET PRESENT VALUE a 1. The difference between the present value of an investment and its cost is the: a. net present value. b. internal rate of return. c. payback period. d. profitability index. e. discounted payback period. DISCOUNTED CASH FLOW VALUATION b 2. The process of valuing an investment by determining the present value of its future cash flows is called (the): NET PRESENT VALUE RULE c 3. Which one of the following statements concerning net present value (NPV) is correct? PAYBACK c 4. The length of time required for an investment to generate cash flows sufficient to recover the initial cost of the investment is called the:
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CHAPTER 9 PAYBACK RULE a 5. Which one of the following statements is correct concerning the payback period? a. An investment is acceptable if its calculated payback period is less than some pre- specified period of time. b. An investment should be accepted if the payback is positive and rejected if it is negative. c. An investment should be rejected if the payback is positive and accepted if it is negative. d. An investment is acceptable if its calculated payback period is greater than some pre- specified period of time. e. An investment should be accepted any time the payback period is less than the discounted payback period, given a positive discount rate. DISCOUNTED PAYBACK e 6. The length of time required for a project’s discounted cash flows to equal the initial cost of the project is called the: DISCOUNTED PAYBACK RULE d
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