Quiz4: chapter 9
Name __________________________
Section you are registered for ___________
1.
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. internal rate of return.
d. discounted cash period
b. payback period.
e. net present value.
c. profitability index.
2. You are considering the following two mutually exclusive projects. The required rate of return is
10.75 percent for project A and 12 percent for project B. Which project should you accept and why?
a. project A; because it has the lower required rate of return
b. project A; because its NPV is about $796 more than the NPV of project B
c. project B; because it has the largest total cash inflow
d. project B; because it returns all its cash flows within two years
e. project B; because it is the largest sized project
3. You are considering a project with the following data:
IRR
=
11.4%
NPV = $437
Profitability ratio
=
1.03
Payback period = 3.1 years
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 Spring '08
 Polkovnichenko
 Net Present Value, 11.4%, $437, $13,814.92, $14,610.69, $795.77

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