AnswerKey_Quiz1_2011 Fin 451

AnswerKey_Quiz1_2011 Fin 451 - Quiz_Chap09 Key 1. Which one...

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Quiz_Chap09 Key 1. Which one of the following methods of project analysis is defined as computing the value of a project based upon the present value of the project's anticipated cash flows? A. constant dividend growth model B. discounted cash flow valuation C. average accounting return D. expected earnings model E. internal rate of return Refer to section 9.1 AACSB: N/A Bloom's: Knowledge Difficulty: Basic Learning Objective: 9-1 Ross - Chapter 09 #2 Section: 9.1 Topic: Discounted cash flow valuation 2. Which one of the following will decrease the net present value of a project? A. increasing the value of each of the project's discounted cash inflows B. moving each of the cash inflows back to a later time period C. decreasing the required discount rate D. increasing the project's initial cost at time zero E. increasing the amount of the final cash inflow Refer to section 9.1 AACSB: N/A Bloom's: Comprehension Difficulty: Basic Learning Objective: 9-1 Ross - Chapter 09 #12 Section: 9.1 Topic: Net present value
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3. A project has a required payback period of three years. Which one of the following statements is correct concerning the payback analysis of this project? A. The cash flows in each of the three years must exceed one-third of the project's initial cost if the project is to be accepted. B. The cash flow in year three is ignored. C. The project's cash flow in year three is discounted by a factor of (1 + R) 3 . D. The cash flow in year two is valued just as highly as the cash flow in year one. E. The project is acceptable whenever the payback period exceeds three years. Refer to section 9.2 AACSB: N/A Bloom's: Comprehension Difficulty: Basic Learning Objective: 9-2 Ross - Chapter 09 #22 Section: 9.2 Topic: Payback 4. Which of the following are definite indicators of an accept decision for an independent project with conventional cash flows? I. positive net present value II. profitability index greater than zero III. internal rate of return greater than the required rate IV. positive internal rate of return A. I and III only B. II and IV only C. I, II, and III only D. II, III, and IV only E. I, II, III, and IV Refer to section 9.7 AACSB: N/A Bloom's: Knowledge Difficulty: Basic Learning Objective: 9-1 Ross - Chapter 09 #56 Section: 9.7 Topic: Capital budgeting methods
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5. What is the net present value of a project with the following cash flows if the required rate of return is 12 percent? A. -$1,574.41 B. -$1,208.19 C. -$842.12 D. $729.09 E. $1,311.16 AACSB: Analytic Bloom's: Application Difficulty: Basic Learning Objective: 9-1 Ross - Chapter 09 #57 Section: 9.1 Topic: Net present value
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6. You are considering two mutually exclusive projects with the following cash flows. Which project(s) should you accept if the discount rate is 8.5 percent? What if the discount rate is 13 percent? A.
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AnswerKey_Quiz1_2011 Fin 451 - Quiz_Chap09 Key 1. Which one...

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