# If you were trying to decrease a project’s net present value

If you were trying to decrease a project’s net present value, you would beSelect one:a. increasing the value of each of the project’s discounted cash inflowsb. moving each of the cash inflows forward to a sooner time periodc. decreasing the required discount rated. increasing the project’s initial cost at time zeroe. increasing the amount of the final cash inflow 1 If you were asked to manage a capital budgeting project, you would considerwhich of the following?I. project start-up costsII. timing of all projected cash flowsIII. dependability of future cash flowsIV. dollar amount of each projected cash flowSelect one:a. I and IV onlyb. I, II, and IV onlyc. I, II, and III onlyd. II, III, and IV onlye. I, II, III, and IV 1 You are considering a project but you realize this project has a net present valueof zero. Based on this info, which of the following is true?Select one:a. the total of the cash inflows must equal the initial cost of the project.b. the project earns a return exactly equal to the discount rate.c. a decrease in the project’s initial cost will cause the project to have anegative NPVd. any delay in receiving the projected cash inflows will cause the project tohave a positive NPV. e. the project’s PI must be also be equal to zero. 1 FMC Technologies is considering a project that requires $2,380,000 of fixedassets. When the project ends, those assets are expected to have an after-taxsalvage value of $145,000. How is the $145,000 salvage value handled whencomputing the net present value of the project?Select one:a. reduction in the cash outflow at time zerob. cash inflow in the final year of the projectc. cash inflow for the year following the final year of the projectd. cash inflow prorated over the life of the projecte. not included in the net present value You are tasked with choosing between three projects. The net present values ofthese projects are:Project NPV 1 -$168 2 $0 3 $172 You should:Select one:a. accept Projects 1 and 2 and reject Project 3b. reject all projectsc. accept Project 3 and reject Projects 1 and 2d. accept Projects 2 and 3 and reject Project 1 1 What is the NPV for the following project if its cost of capital is 15 percent andit’s initial after tax cost is $6,000,000 and it is expected to provide after-taxoperating cash inflows of $1,800,000 in year 1, $1,900,000 in year 2,$1,700,000 in year 3 and $1,600,000 in year 4? Select one:a. $371,764b. ($965,527)c. ($137,053)d. ($1,034,511) 1 A company has the opportunity to choose between Project X and Project Y.Project X costs $500 and has cash inflow of $400 in each of the next 2 years.Project Y also costs $500, and generates cash flows of $500 and $325 for thenext 2 years, respectively. Which investment should the firm choose if the costof capital is 25 percent?Select one:a. Project Xb. Project Yc. Neitherd. Not enough information to tell 1 Your company just informed you that they have a cost of capital of 14 percentand request that you evaluate three capital projects. The internal rates of returnare as follows:Project Internal Rate of Return 1 12% 2 15% 3 13% Your recommendation is toSelect one:a. accept Projects 2 and 3 and reject Project 1b. accept Project 2 and reject Projects 1 and 3c. accept Project 3 and reject Projects 1 and 2 d. accept Project 1 and reject Projects 2 and 3 1 The rate of return a company is required to earn on any investment in order tomaintain the market value of its stock.Select one:a. internal rate of returnb. gross profit marginc. cost of capitald. net present value When considering internal rate of return (IRR), which statement(s) is/are correct?I. The IRR method of analysis can be adapted to handle non-conventional cashflows.II. The IRR that causes the net present value of the differences between twoproject’s cash flows to equal zero is called the crossover rate.III. The IRR tends to be used more than net present value simply because itsresults are easier to comprehend.IV. Both the timing and the amount of a project’s cash flows affect the value ofthe project’s IRR.Select one:a. I and II onlyb. III and IV onlyc. I, II and III onlyd. II, III, and IV onlye. I, II, III, and IV 1 You have been asked to consider a project with the following characteristics:Internal rate of return: 11.63%Profitability ratio: 1.04Net present value: $987Payback period: 2.98 years Which of the following statements is correct given this information?I. The discount rate used in computing the net present value was less than 11.63percent.II. The discounted payback period must be more than 2.98 years.III. The discount rate used in the computation of the profitability ratio was 11.63percent.IV. This project should be accepted as the internal rate of return exceeds therequired return.Select one:a. I and II onlyb. III and IV onlyc. I, II and IV onlyd. II, III and IV onlye. I, II, III and IV 1 An investment has the following cash flows and a required return of 14 percent.Based on IRR, should this project be accepted? Why or why not?Year 0: -$42,000Year 1: $15,300Year 2: $28,400Year 3: $7,500Select one:a. No; The IRR exceeds the required return by about 0.06 percent.b. No; the IRR exceeds the required return by about 1.53 percent.c. No; The IRR is less than the required return by about 2.53 percentd. Yes; The IRR exceeds the required return by about 2.53 percente. Yes; The IRR is less than the required return by about 0.06 percent 1 You are given the following cash flows. If you assume a 14.5 percent requiredreturn, what is the profitability index?Year 0 -$46,500Year 1 $12,200 Year 2 $38,400Year 3 $11,300Select one:a. 0.94b. 0.98c. 1.02d. 1.06e. 1.11 1 You are considering the purchase of a Ben & Jerrys booth. This booth will cost$9,000. Sales are expected to be $3,600 per year for the next 3 years. After thethree years, the value is expected to be zero. What is the payback period?Select one:a. 1.48b. 1.67c. 1.91d. 2.0e. 2.5 Next The internal rate of returnSelect one:a. May produce multiple rates of return when cash flows are conventionalb. Is best used when comparing mutually exclusive projectsc. Is rarely used in the business world todayd. Is principally used to evaluate small dollar projectse. Is easy to understand 1 Johnson Mirrors is facing the possibility of two mutually exclusive projects. Theyhave determined that the required rate for similar projects is 11.7 percent.Project A has an internal rate of return (IRR) of 15.3 percent and Project B has an IRR of 16.5 percent. Given this information, which one of the followingstatements is correct?Select one:a. Project A should be accepted as its IRR is closer to the crossover point thanis Project B’s IRR.b. Project B should be accepted as it has the higher IRR.c. Both projects should be accepted as both of the project’s IRRs exceed thecrossover rate.d. Neither project should be accepted since both of the project’s IRRs exceedthe crossover rate.e. You cannot determine which project should be accepted given theinformation provided.When the initial cost of a project is less than the present value of the cashinflows, then the project should be:Select one:a. accepted because the internal rate of return is positive.b. accepted because the profitability index is greater than 1.c. accepted because the profitability index is negative.d. rejected because the internal rate of return is negative.e. rejected because the net present value is negative. 1 Which two methods of project analysis are the most biased towards short-termprojects?Select one:a. net present value and internal rate of returnb. internal rate of return and profitability indexc. payback and discounted paybackd. net present value and discounted paybacke. discounted payback and profitability index 1 If the internal rate of return is equal to or greater than $0, the project should beaccepted.Select one:True Or false?