MCQ 09-50 When cash flows from a ... When cash flows from a project are non-conventional, there may be ___________ on the project. Multiple Choice Multiple NPVs. Negative NPV. Multiple IRRs. Non-existent IRR. Negative profitability index.
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MCQ 09-50 When cash flows from a ...
When cash flows from a project are non-conventional, there may be ___________ on the project.
-
Multiple NPVs.
-
Negative
NPV . -
Multiple IRRs.
-
Non-existent
IRR . -
Negative profitability index.
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- Which of the following is/are true for the average accounting return method of project analysis? I. does not need a cutoff rate II. ignores time value of money II. is based on project's cash flows IV. easily obtainable information for computation Multiple Choice I only I, II, II, and IVBreakeven cash inflow refers to ________. the minimum level of cash inflow necessary for a project to be acceptable, that is, NPV greater than or equal to zero the minimum level of cash inflow necessary for a project to be acceptable, that is, IRR less than zero cost of capital the minimum level of cash inflow necessary for a project to be acceptable, that is, IRR equals zero the minimum level of cash inflow necessary for a project to be acceptable, that is, NPV less than zeroWhich of the following statements is correct regarding the payback method? Takes account of differences in size among projects. If a project’s payback is positive, then the project should be accepted because it must have a zero NPV. Ignores cash flows beyond the payback period. Has an objective, market-determined benchmark for making decisions. Directly account for the time value of money.
- Multiple IRRs arise when considering projects with normal cash flows with positive NPV with negative NPV with only positive cash flows with non-normal cash flowsThe profitability index O will never be greater than 1. O does not take into account the discounted cash flows. O allows comparison of the relative desirability of projects that require differing initial investments. O is calculated by dividing total cash flows by the initial investment.22. If a capital budgeting project’s cash flows are not normal, the internal rate of return (IRR) method should be used to make the investment decision. Group of answer choices True False
- 11. Under certain conditions, a project may have more than one IRR. One such condition is when, in addition to the initial investment at time = 0, a negative cash flow (or cost) occurs at the end of the project's life Group of answer choices True FalseQUESTION #1: Which of the following is a disadvantage of using the IRR method of capital budgeting over other types: A- IRR does not consider the time and value of money. B- IRR assumes reinvestment of project cash flows at the same rate as the IRR C- IRR ignores the prudent simplicity of paybacks D- None of the above QUESTION #2: The net present value (NPV) of an investment is___________. A- The present value of all benefits (cash inflows) B- The present value of all costs (cash outflows) of the project C- The present value of all benefits (cash inflows) minus the present value of all costs (cash outflows) of the project D- The present value of all benefits (cash outflows) minus the present value of all costs (cash inflows) of the projectQ. A positive NPV forecast for a new project is reliable only if it is based on Multiple Choices: - forecasts of cash flows. - identifiable sources of economic rents. - Michael Porter's theories. - results from Monte Carlo analysis.
- Which of the following is an advantage of the internal rate of return (IRR) rule? Multiple choice question. It is easy to understand and communicate. It can be applied to projects with non-conventional cash flows. It always gives multiple IRRs for non-conventional cash flows. It needs less input data than the NPV method.What are the reinvestment rate assumptions for the NPV and the IRR? A.IRR: Risk Free Rate NPV: WACC B.IRR: The IRR itself NPV: WACC C.The cash flows generated by the project are not assumed to be reinvested. So they will not earn a rate of return. D.IRR: Risk free rate NPV: Risk free Rate E. IRR:WACC NPV: WACCWhich of the following statements is CORRECT? a. If a project with normal cash flows has an IRR greater than the cost of capital, the project must also have a positive NPV. b. If a project with normal cash flows has an IRR less than the cost of capital, the project must have a positive NPV. c. If the NPV is negative, the IRR must also be negative. d. A project's MIRR can never exceed its IRR. e. If Project A's IRR exceeds Project B's, then A must have the higher NPV.
