chap 7 -CF - Chapter 7 1 All else constant the net present value of a typical investment project increases when a the discount rate increases b each

chap 7 -CF - Chapter 7 1 All else constant the net present...

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Chapter 71. All else constant, the net present value of a typical investment 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 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: d2. The internal rate of return (IRR):I. rule states that a typical investment project with an IRR that is less than the required rate should be accepted.II. is the rate generated solely by the cash flows of an investment.III. is the rate that causes the net present value of a project to exactly equal zero.IV. can effectively be used to analyze all investment scenarios.3. Matt is analyzing two mutually exclusive projects of similar size and has prepared the following data. Both projects have 5 year lives.Matt has been asked for his best recommendation given this information. His recommendation should be to accept:
4. In actual practice, managers frequently use the:I. AAR because the necessary accounting numbers are readily available.II. IRR because the results are easy to communicate and understand.III. payback because of its simplicity.IV. net present value because it is considered by many to be the best method of analysis.

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