10.15%
If a project is expected to cost $150,000 and produce cash flows of $75,000, $0, $55,000, and
$60,000 over the next 4 years, what is the net present value (NPV), assuming a required rate of
return of 4.25%?
The correct answer is:
$21,284.37
Microsoft
Excel's present value
function does not take into account which of the following?
Initial outlay
If a project is expected to cost $180,000 and produce cash flows of $80,000, $90,000, and
$15,000
over the next 3 years,
what is the discounted payback, assuming a discounted rate of
5%?
The correct answer is:
No solution

Which of the following is a formula for the profitability index?
1 + (Net present value / Initial investment)
Initial outlays are financed at the firm’s __________.
financing cost
If a project is expected to cost $185,000 and produce cash flows of $75,000, $20,000, $65,000,
and $75,000 over the next 4 years, what is the discounted payback,
assuming a discount rate of
5.25%?
The correct answer is:
3.65
If the net present value (NPV) of a project is equal to zero,
the return to the investors will be
equal to __________.
the required rate of return
Microsoft
Excel's present value
function does not take into account which of the following?
Initial outlay
Modified internal rate of return (MIRR) cash flows need to account for which of the following?
The correct answer is:
Terminal values
An unconventional cash flow over 5 years with three outflows will likely result in __________.
three internal rate of returns
If a project is expected to cost $250,000 and produce cash flows of $100,000, $110,000, and
$90,000 over the next 3 years,
what is the modified internal rate of return (MIRR), assuming a
required rate of return of 5%, a financing rate of 3%, and a cost of capital of
4.5%?
The correct answer is:
7.91%
If the payback period is greater than the minimum payback, the project would be __________.
The correct answer is:
rejected
If a project is expected to cost $180,000 and produce cash flows of $80,000, $90,000, and
$15,000 over the next 3 years, what is the payback, assuming a required rate of return of 5%?

2.67
When a conflict between decision rules exist, it is best to rely on the __________.
net present value (NPV)
Positive cash flows are re-invested at the firm’s __________.
The correct answer is:
cost of capital
Capital Rationing
Capital rationing
is a case in which a firm has a capital constraint. This constraint forces a firm
to allocate funds in the most efficient way possible.
Although being able to determine the profitability of a project is a valuable skill, analysts
are forced to compare projects and allocate funds in the most efficient way possible, taking
shareholder wealth into account. This must be extended all the way down to the individual
project level. The expectation is that these individual projects will contribute to the firm’s
overall value.
Capital rationing
seeks to limit a company’s investment. The capital rationing system
employed will usually become stricter as a result of either reduced capital availability or
when a company has a history of poor previous investments. This should be an expected
outcome of a historical display of poor investment choices.

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