2201AFE_Tutorial_05

2201AFE_Tutorial_05 - 2201AFE Corporate Finance TOPIC: Net...

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2201AFE Corporate Finance TOPIC: Net Present Value and Other Investment Criteria 10 Multiple-Choice Questions 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. 2. The process of valuing an investment by determining the present value of its future cash flows is called (the): a. constant dividend growth model. b. discounted cash flow valuation. c. average accounting valuation. d. expected earnings model. e. Capital Asset Pricing Model. 3. 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. 4. 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.
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This note was uploaded on 10/10/2010 for the course ECON 7300 at University of Sydney.

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2201AFE_Tutorial_05 - 2201AFE Corporate Finance TOPIC: Net...

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