Multiple Choice Questions

In actual practice, managers most frequently use which two types of investment criteria?
  • Internal rate of return and net present value
  • discount rate which causes the net present value of a project to equal zero.
  • have multiple rates of return.
  • the project earns a return exactly equal to the discount rate.
You are considering a project with conventional cash flows, an IRR of 11.63 percent, a PI of 1.04, an NPV of $987, and a payback period of 2.98 years. Which one of the following statements is correct given this information?
  • the present value of current and future benefits minus the present value of current and future costs
  • The project's cash inflows equal its cash outflows in current dollar terms.
  • discount rate which causes the net present value of a project to equal zero.
  • The discount rate used in computing the net present value was less than 11.63 percent.
There are two distinct discount rates at which a particular project will have a zero net present value. In this situation, the project is said to:
  • profitability index.
  • NPV profile
  • discounted cash flow valuation.
  • have multiple rates of return.
The internal rate of return is defined as the:
  • The discount rate used in computing the net present value was less than 11.63 percent.
  • the project earns a return exactly equal to the discount rate.
  • discount rate which causes the net present value of a project to equal zero.
  • Internal rate of return and net present value
The length of time a firm must wait to recoup the money it has invested in a project is called the:
  • have multiple rates of return.
  • payback period.
  • profitability index.
  • crossover rate.
Net present value:
  • the project earns a return exactly equal to the discount rate.
  • the present value of current and future benefits minus the present value of current and future costs
  • The discount rate used in computing the net present value was less than 11.63 percent.
  • The project's cash inflows equal its cash outflows in current dollar terms.
The IRR that causes the net present value of the differences between two project's cash flows to equal zero is called the:
  • profitability index.
  • payback period.
  • NPV profile
  • crossover rate.
You are viewing a graph that plots the NPVs of a project to various discount rates that could be applied to the project's cash flows. What is the name given to this graph?
  • The discount rate used in computing the net present value was less than 11.63 percent.
  • NPV profile
  • have multiple rates of return.
  • crossover rate.
A project has a net present value of zero. Which one of the following best describes this project?
  • the project earns a return exactly equal to the discount rate.
  • The discount rate used in computing the net present value was less than 11.63 percent.
  • The project's cash inflows equal its cash outflows in current dollar terms.
  • the present value of current and future benefits minus the present value of current and future costs
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Multiple Choice Questions
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