True False 8 A positive net present value is means that the projects rate of

True false 8 a positive net present value is means

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capital budget committee, officials, board of directors. True False 8. A positive net present value is means that the project’s rate of return exceeds the required rate of return. True False 9. The discount rate and the hurdle rate are the same. True False 10. If a project has intangible benefits whose value is hard to estimate, it is best to ignore the benefits, since any estimate of their value would most likely be wrong. True False 11. A company is considering two projects. Project A requires an initial investment of $50,000 and gives an annual cash flow of $10,000. Project B requires an initial I investment of $80,000 and annual cash flow of $8,000. Using the cash payback technique, which should be chosen? (Show your work) 12. The following information is available for a potential capital investment: Initial investment $60,000 Net annual cash flow 15,400 Net present value 3,143 Useful life 5 years Calculate the potential investment’s internal rate of return. Round to the nearest hundredth. (Show your work) 3
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13. Suppose Reno Company’s net income of $13,000 includes a charge for depreciation expense of $26,000, then its estimated net annual cash flows would be $39,000. True False 14. The two popular techniques for evaluating capital investments are the payback and net present value methods. True False 15. Cash outflows are monies coming in and cash inflows are monies going out. True False 16. Subtracting a company’s annual cash outflows from annual cash inflow equal net annual cash flow. True False 17. A proposal is accepted when net present value zero or negative. True False 18. When making a selection among acceptable proposals, the higher the positive net present value, the more attractive the investment. True False 19. If the net present value of a proposed project is negative, we accept the proposal. True False 20. When the annual cash flows are unequal, we cannot use annuity tables to calculate their net present value. Instead we use tables showing the present value of a single future amount for each annual cash flow. True False 4
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