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A
A project’s NPV is generally found by compounding the cash inflows at the WACC to find the terminal
value (TV), then discounting the TV at the IRR to find its PV.
The higher the WACC used to calculate the NPV, the lower the calculated NPV will be.
If a project’s NPV is greater than zero, then its IRR must be less than the WACC.
If a project’s NPV is greater than zero, then its IRR must be less than zero.
The NPVs of relatively risky projects should be found using relatively low WACCs.
B
C
D
E
QUESTION:
13
[QUESTION BANK ID:
7358]
CORRECT
In 1985, a given Japanese imported automobile sold for 1,476,000 yen, or $8,200. If the car still sold for
the same amount of yen today but the current exchange rate is 144 yen per dollar, what would the car be
selling for today in U.S. dollars?
TYPE:
MULTIPLE CHOICE
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QUESTION:
14
[QUESTION BANK ID:
109554]
CORRECT
Bing Services is now in the final year of a project. The equipment originally cost $20,000, of which 75%
has been depreciated. Bing can sell the used equipment today for $6,000, and its tax rate is 40%. What is
the equipment’s net aftertax salvage value for use in a capital budgeting analysis? Note that if the
equipment's final market value is less than its book value, Bing will receive a tax credit as a result of the
sale.
TYPE:
MULTIPLE CHOICE
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B
C
D
E
QUESTION:
15
[QUESTION BANK ID:
33165]
TYPE:
MULTIPLE CHOICE
CORRECT
Taussig Technologies is considering two potential projects, X and Y. In assessing the projects’ risks, the
company estimated the beta of each project versus both the company’s other assets and the stock
market, and it also conducted thorough scenario and simulation analyses. This research produced the
following
numbers:
Whic
h of the following statements is CORRECT?
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B
C
D
E
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