12. An investment is acceptable if the profitability index (PI) of the investment is:
A.greater than one.B. less than one.C. greater than the internal rate of return (IRR).D. less than the net present value (NPV).E. greater than a pre-specified rate of return.Difficulty level: EasyTopic: PROFITABILITY INDEX RULEType: DEFINITIONS
13. All else constant, the net present value of a typical investment project increases when:
Difficulty level: EasyTopic: NET PRESENT VALUEType: CONCEPTS
14. The primary reason that company projects with positive net present values are considered acceptable is that:
Difficulty level: EasyTopic: NET PRESENT VALUE
Type: CONCEPTS
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Chapter 05 - Net Present Value and Other Investment Rules
15. If a project has a net present value equal to zero, then:I. the present value of the cash inflows exceeds the initial cost of the project.II. the project produces a rate of return that just equals the rate required to accept the project.III. the project is expected to produce only the minimally required cash inflows.IV. any delay in receiving the projected cash inflows will cause the project to have a negative net present value.
Difficulty level: MediumTopic: NET PRESENT VALUEType: CONCEPTS
16. Net present value:
A. cannot be used when deciding between two mutually exclusive projects.B.is more useful to decision makers than the internal rate of return when comparing different sized projects.C. is easy to explain to non-financial managers and thus is the primary method of analysis used by the lowest levels of management.D. is not an as widely used tool as payback and discounted payback.E. is very similar in its methodology to the average accounting return.Difficulty level: EasyTopic: NET PRESENT VALUE
Type: CONCEPTS