Corp.fin, Test 3solultion

Corp.fin, Test 3solultion - Test 3 Name _ 1. The length of...

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Test 3 Name __________________ 1. The length of time required for an investment to generate cash flows sufficient to recover the initial cost of the investment is called the: a. net present value. b. internal rate of return. c. payback period. d. profitability index. e. discounted cash period. 2. 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. 3. The length of time required for a project’s discounted cash flows to equal the initial cost of the project is called the: a. net present value. b. internal rate of return. c. payback period. d. discounted profitability index. e. discounted payback period. 4. An investment is acceptable if its IRR: a. is exactly equal to its net present value (NPV).
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b. is exactly equal to zero. c. is less than the required return. d. exceeds the required return. e. is exactly equal to 100%. 5. A situation in which accepting one investment prevents the acceptance of another investment is called the: a. net present value profile. b. operational ambiguity decision. c. mutually exclusive investment decision. d. issues of scale problem. e. multiple choices of operations decision. - 2 - 6. When the present value of the cash inflows exceeds the initial cost of a project, then the project should be: a. accepted because the internal rate of return is positive. b. accepted because the profitability index is greater than 1. c. accepted because the profitability index is negative. d. rejected because the internal rate of return is negative. e. rejected because the net present value is negative. 7. You are considering a project with the following data: Internal rate of return: 8.7% Profitability ratio: 0.98 Net present value: -$393
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Payback period: 2.44 years Required return: 9.5% Which one of the following is correct given this information? a. The discount rate used in computing the net present value must have been less than
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Corp.fin, Test 3solultion - Test 3 Name _ 1. The length of...

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