MANAGERIAL ECONOMICS
5th Edition
ISBN: 9781337106658
Author: FROEB
Publisher: CENGAGE L
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Chapter 5, Problem 5MC
To determine
The
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What process does the net present value method use to help management determine whether a project is acceptable to a company?
Options :
A. It discounts net cash flows to their present value and then compares that value to the capital outlay required by the project.B. It determines the interest rate that will cause the present value of the capital expenditure to equal the present value of the expected net cash flows.C. It divides the present value of net cash flows by the initial investment to determine the profitability index of the project.D. It identifies the time period required to recover the cost of the capital investment from the net annual cash flow produced by the project.
1.
A project earns $10,000 a year for five years. The present total value of the project is (using a discount rate
of 5.75%):
2.
a) $50,000
b) more than $50,000
c) less than $50,000
The NPV of a project is $1,012, using a discount rate of 9.75% p.a. The rate of return on this project is:
a. 9.75%
b. more than 9.75%
c. less than 9.75%
If your investment earns 6% each year for two years and will be worth $540.80 after two years, its present value is
Select one:
a. $481.31.
b. $450.
C. $501.25.
d. $510.33.
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