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13 the interest rate that makes NPV equal to Zero when it 19 Used as the discount rate 1. 1WIRR (Internal Rate of Return) (d) NpV. O Pay back rule 2 When Npv 15 greater than 0. the pr will be (Use the profYtability and Npv relahions) (a) less than1 (b) greater than 1. PI () less than zero d) greater than 7ero 3. investment to gentrate cash flows SufficIent to recover its initial cost S called O PI( proitabulity Index) (c) NpV ( Net present Value b) pay Back Rule the amount of tme required for an (d) AARCAV.. Accounting Retur

13 the interest rate that makes NPV equal to Zero when it 19 Used as the discount rate 1. 1WIRR (Internal Rate of Return) (d) NpV. O Pay back rule 2 When Npv 15 greater than 0. the pr will be (Use the profYtability and Npv relahions) (a) less than1 (b) greater than 1. PI () less than zero d) greater than 7ero 3. investment to gentrate cash flows SufficIent to recover its initial cost S called O PI( proitabulity Index) (c) NpV ( Net present Value b) pay Back Rule the amount of tme required for an (d) AARCAV.. Accounting Retur

Essentials Of Investments
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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### Educational Content on Capital Budgeting Techniques #### Multiple Choice Questions on Capital Budgeting 1. **The interest rate that makes NPV equal to zero when it is used as the discount rate:** - (a) Pay back rule - (b) PI - (c) IRR (Internal Rate of Return) - (d) NPV 2. **When NPV is greater than 0, the PI will be:** - (a) Use the profitability and NPV relations - (b) Less than 1 - (c) Less than zero - (d) Greater than zero 3. **The amount of time required for an investment to generate cash flows sufficient to recover its initial costs is called:** - (a) PI (Profitability Index) - (b) NPV (Net Present Value) - (c) Pay back rule - (d) ARR (Avg. Accounting Return) 4. **The capital budgeting technique that ignores the time value of money is:** - (a) NPV - (b) PI - (c) All techniques ignore time value of money - (d) Payback period 5. **One flaw of the payback period:** - (a) Ignores cash flows after the cutoff point - (b) Easy to understand - (c) Easy to calculate - (d) Handy for short term projects 6. **If you buy a treasury bond that gives $100 per year, the risk of the bond is:** - (a) We cannot tell - (b) Positive - (c) Negative - (d) Zero These questions are designed to test your understanding of various capital budgeting principles, such as the Internal Rate of Return (IRR), Net Present Value (NPV), and the payback period. Understanding these concepts is vital for evaluating investment opportunities and making sound financial decisions.
Transcribed Image Text:### Educational Content on Capital Budgeting Techniques #### Multiple Choice Questions on Capital Budgeting 1. **The interest rate that makes NPV equal to zero when it is used as the discount rate:** - (a) Pay back rule - (b) PI - (c) IRR (Internal Rate of Return) - (d) NPV 2. **When NPV is greater than 0, the PI will be:** - (a) Use the profitability and NPV relations - (b) Less than 1 - (c) Less than zero - (d) Greater than zero 3. **The amount of time required for an investment to generate cash flows sufficient to recover its initial costs is called:** - (a) PI (Profitability Index) - (b) NPV (Net Present Value) - (c) Pay back rule - (d) ARR (Avg. Accounting Return) 4. **The capital budgeting technique that ignores the time value of money is:** - (a) NPV - (b) PI - (c) All techniques ignore time value of money - (d) Payback period 5. **One flaw of the payback period:** - (a) Ignores cash flows after the cutoff point - (b) Easy to understand - (c) Easy to calculate - (d) Handy for short term projects 6. **If you buy a treasury bond that gives $100 per year, the risk of the bond is:** - (a) We cannot tell - (b) Positive - (c) Negative - (d) Zero These questions are designed to test your understanding of various capital budgeting principles, such as the Internal Rate of Return (IRR), Net Present Value (NPV), and the payback period. Understanding these concepts is vital for evaluating investment opportunities and making sound financial decisions.
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