Project Valuation

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SKANS School of Accountancy (Tariq Block Campus) *

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12009A

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Economics

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Nov 24, 2024

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How is the structure of a corporation affected by the modern project valuation approach? The structure is inflexible. Formal departments are less of a focus, and special skills are utilized in all projects. It is static. It has shifted from a project structure to one that is focused on production dynamics. Solution The correct answer is Formal departments are less of a focus, and special skills are utilized in all projects. Correct Hide solution Question 2 Project valuation is important because it allows a firm to __________. rank a list of products compare projects make inefficient decisions ignore the best way to allocate resources Solution The correct answer is compare projects Wrong Hide solution Question 3 Read the following scenario Open file: Apex Printing The team at Apex believes that it has chosen the right project by pursuing the coffee packaging idea because the valuation shows that the __________. internal rate of return (IRR) is lower than the weighted average cost of capital (WACC) yield of the project is below the weighted average cost of capital (WACC) yield of the project is less than the hurdle rate

internal rate of return (IRR) is above the hurdle rate Solution The correct answer is internal rate of return (IRR) is above the hurdle rate Wrong Hide solution Question 4 How is the net present value (NPV) method used to determine if a project should be done? The partial cash flow for a project is compared to other projects. The sum of cash flow for a project is compared to other projects. The sum of the cash flows must not meet company expectations. The sum of cash flow for a project is compared to competitors. Solution The correct answer is The sum of cash flow for a project is compared to other projects. Wrong Hide solution Question 5 Which of the following is a method of project valuation? External rate of return Internal rate of return IRP NPR Solution The correct answer is Internal rate of return Correct Hide solution Question 6

Using the internal rate of return (IRR) method, a company can determine if which of the following is true? The IRR is below the hurdle rate. The yield of the project is greater than the hurdle rate. The yield of the project is less than the hurdle rate. The IRR is lower than the weighted average cost of capital (WACC). Solution The correct answer is The yield of the project is greater than the hurdle rate. Wrong Hide solution Question 7 Read the following scenario Open file: Apex Printing If the project planners at Apex are incorrect about the sales projections and should be using a figure of $15 million per year, what will this do to the project's net present value (NPV)? The net present value will be raised. There will be a reduction in the NPV. There will be an increase in the NPV. The NPV will increase. Solution The correct answer is There will be a reduction in the NPV. How is the structure of a corporation affected by the modern project valuation approach? Formal departments are more of a focus, and special skills are not utilized in all projects. The structure is inflexible. It has shifted from a project structure to one that is focused on production dynamics. It has shifted from a production structure to one focused on project dynamics.

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Solution The correct answer is It has shifted from a production structure to one focused on project dynamics. Wrong Hide solution Question 6 Read the following scenario Open file: Apex Printing When calculating the net present value (NPV) for Apex, the team forgets to discount the value of the sales figures. What should they do? Make the figures inaccurate by discounting them Increase the sales cash flow by converting it to present value Revise the sales cash flow by using present value factors Leave the sales values as they are Solution The correct answer is Revise the sales cash flow by using present value factors Wrong Hide solution Question 12 Projects can take many forms with the new valuation approaches. Which of the following represents a possible project? Corporate strategic failure An old product line A market plan proposal A market plan Solution The correct answer is A market plan

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