# An investment is acceptable if its irr a is exactly

• Test Prep
• 98
• 100% (33) 33 out of 33 people found this document helpful

This preview shows page 66 - 68 out of 98 pages.

##### We have textbook solutions for you!
The document you are viewing contains questions related to this textbook. The document you are viewing contains questions related to this textbook.
Chapter 3 / Exercise 83
Finite Mathematics and Applied Calculus
Costenoble/Waner Expert Verified
302)An investment is acceptable if it's IRR:A)Is exactly equal to its net present value (NPV).B)Is exactly equal to 100 percent.C)Is exactly equal to zero.D)Exceeds the required return.E)Is less than the required return.Answer: D303)Analysis using the profitability index:A)Produces results which typically are difficult to comprehend or apply.B)Is useful when trying to determine which one of two mutually exclusive projects should beaccepted.C)Frequently conflicts with the accept and reject decisions generated by the application of the netpresent value rule.D)Utilizes the same basic variables as those used in the average accounting return.E)Is useful as a decision tool when investment funds are limited.Answer: E304)Net present value is a highly valued decision-making tool because:A)It is computed using the internal rate of return.B)It only includes information which is known with certainty.C)It is affected by the magnitude rather than the timing of a project's cash flows.D)It can be applied to either independent or mutually exclusive projects.E)It reveals the rate of return which investors will earn on average over the lifetime of the project.Answer: D305)The profitability index will be:A)Negative any time the net present value is negative.B)Greater than 1.0 when the IRR is greater than the discount rate.C)Greater than 1.0 whenever the net present value is negative.D)Less than 1.0 any time the discount rate is less than the IRR.E)Equal to 1 any time the IRR is less than the discount rate.Answer: B306)Which one of the following is the primary advantage of the payback method of analysis?A)Current market rate of return considerations.B)Liquidity bias.C)Arbitrary cut-off point.D)Easy to compute.E)Inclusion of time value of money considerations.Answer: D66
##### We have textbook solutions for you!
The document you are viewing contains questions related to this textbook. The document you are viewing contains questions related to this textbook.
Chapter 3 / Exercise 83
Finite Mathematics and Applied Calculus
Costenoble/Waner Expert Verified
307)The internal rate of return will tell you the ________ which can be applied to a project while stillcreating a situation where the project is acceptable.A)minimum discount rateB)minimum period of timeC)maximum period of timeD)maximum discount rateE)accounting rateAnswer: D308)Two projects which each ________ is an example of mutually exclusive projects.A)Have differing internal rates of return.B)Must start up in the same fiscal year.C)Require the total use of the same limited economic resource.D)Require an initial investment of \$1.5 million.E)Must occur during the same period of time.Answer: C
• • • 