Given that the net present value npv is generally

49. Given that the net present value (NPV) is generally considered to be the best method of
project analysis, why should you still use the other methods?
A . IRR validates the NPV decision.
b. Business practice dictates that projects should have three accept indicators before a project
is actually implemented.
c. NPV is unreliable when a project has unconventional cash flows.
d. NPV is unreliable when presented with mutually exclusive opportunities.
e. Business practice dictates that PI must be computed if funds are to be borrowed to finance a
project.
SECTION: 9.7
TOPIC: INVESTMENT ANALYSIS
TYPE: CONCEPTS
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Chapter 009 Net Present Value and Other Investment Criteria
50. In actual practice, managers frequently use the:
I. AAR because the information is so readily available.
II. IRR because the results are easy to communicate and understand.
III. discounted payback because of its simplicity.
IV. net present value because it is considered by many to be the best method of analysis.
SECTION: 9.7
TOPIC: INVESTMENT ANALYSIS
TYPE: CONCEPTS
51. Maryanne wants to start training her most junior assistant, Ken, in the art of project
analysis. Ken has just started college and at present has no education in business finance.
Which one of the following methods would probably be the easiest for Maryanne to explain to
Ken to get him started in project analysis?
SECTION: 9.7
TOPIC: INVESTMENT ANALYSIS
TYPE: CONCEPTS
52. Which two of the following methods of project analysis were the most widely used by
CFO's according to the 1999 survey results discussed in your textbook?
SECTION: 9.7
TOPIC: INVESTMENT ANALYSIS
TYPE: CONCEPTS
9-18

Chapter 009 Net Present Value and Other Investment Criteria
53. Which two of the following methods of project analysis are the most biased towards short-
term projects?
a. NPV and IRR
b. PI and IRR
C . payback and discounted payback
d. NPV and discounted payback
e. AAR and PI
SECTION: 9.7
TOPIC: INVESTMENT ANALYSIS
TYPE: CONCEPTS
54. Tyler is considering a project that has an NPV of $28,500, and IRR of 14.2 percent, and a
payback period of 3.1 years. The required return is 12 percent and the required payback
period is 3.0 years. Which one of the following statements is correct concerning this
situation?
SECTION: 9.7
TOPIC: INVESTMENT ANALYSIS
TYPE: CONCEPTS
9-19

Chapter 009 Net Present Value and Other Investment Criteria