Chapter 11 Practice Exam Q&amp;A

# Chapter 11 Practice Exam Q&amp;A - Chapter 11 Test...

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Chapter 11 Test Questions

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Question 1 All else constant, the net present value of a project increases when: a. the discount rate increases. b. each cash inflow is delayed by one year. c. the initial cost of a project increases. d. the required rate of return decreases. e. all cash inflows occur during the last year of a project’s life instead of periodically throughout the life of the project.
Answer Question 1 NPV is the sum of the PV of all future cash flows (aka CFt / (1+ int)t ) minus the initial outlay. Thus NPV will increase with a decrease in the discount rate, an increase in cash flows, a decrease in the initial outlay, and a speeding up of receiving the cash flows. Answer : D

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Question 2 If a project has a net present value equal to zero, then: I. the present value of the cash inflows exceeds the initial cost of the project. II. the project produces a rate of return that just equals the required rate of return. III. the project will not increase the value of the company. IV. any delay in receiving the projected
Answer Question 2 NPV is the sum of the PV of all future cash flows (aka CFt / (1+ int)t ) minus the initial

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## This note was uploaded on 10/23/2011 for the course BUS M 301 taught by Professor Jimbrau during the Fall '11 term at BYU.

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Chapter 11 Practice Exam Q&amp;A - Chapter 11 Test...

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