Ch_09_S_Key - Cf09ch09Q1f11 Key 1. A project has an initial...

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1 Cf09ch09Q1f11 Key 1. A project has an initial cost of $27,400 and the present value of the estimated cash inflows is $32,600. What is the difference between these two values called? A. net present value B. internal return C. payback value D. profitability index E. discounted payback Refer to section 9.1 2. The present value of an investment's future cash flows divided by the initial cost of the investment is called the: A. net present value. B. internal rate of return. C. average accounting return. D. profitability index. E. profile period. Refer to section 9.6 3. The profitability index is most closely related to which one of the following? A. payback B. discounted payback C. average accounting return D. net present value E. modified internal rate of return Refer to section 9.6
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2 4. 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. accept project A as it always has the higher NPV B. accept project B as it always has the higher NPV C. accept A at 8.5 percent and B at 13 percent D. accept B at 8.5 percent and A at 13 percent E. accept B at 8.5 percent and neither at 13 percent At 8.5 percent, Project B has the higher NPV. At 13 percent, both projects have negative NPVs.
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3 5. You are considering the following two mutually exclusive projects. Both projects will be depreciated using straight-
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This note was uploaded on 11/29/2011 for the course FINANCE 332 taught by Professor Linney during the Fall '11 term at Guilford Tech.

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Ch_09_S_Key - Cf09ch09Q1f11 Key 1. A project has an initial...

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