When operating under a single-period capital-rationing constraint, you may first want to try selecting projects by descending order of their in order to give yourself the best chance to select the mix of projects that adds most to firm value. A. profitability index (PI) B. net present value (NPV) C. internal rate of return (IRR) D. payback period (PBP)

When operating under a single-period capital-rationing constraint, you may first want to

try selecting projects by descending order of their in order to give yourself the

best chance to select the mix of projects that adds most to firm value.

A. profitability index (PI)

B. net present value (NPV)

C. internal rate of return (IRR)

D. payback period (PBP)
by

1 Answer

Answer :

B. net present value (NPV)
by

Related questions

When operating under a single-period capital-rationing constraint, you may first want to try selecting projects by descending order of their in order to give yourself the best chance to select the mix of projects that adds most to firm value. A. profitability index (PI) B. net present value (NPV) C. internal rate of return (IRR) D. payback period (PBP)

Description : When operating under a single-period capital-rationing constraint, you may first want to try selecting projects by descending order of their in order to give yourself the best chance to select the mix of ... net present value (NPV) C. internal rate of return (IRR) D. payback period (PBP)

Last Answer : B. net present value (NPV)

A project has a Profitability Index of 1.30. What does it mean? A.The NPV is less than zero B.The payback period is more than one year C.That the project returns Rs 1.30 for every Re 1 invested in the project D.That IRR is 1.30 times that of the Hurdle Rate

Description : A project has a Profitability Index of 1.30. What does it mean?  A.The NPV is less than zero B.The payback period is more than one year  C.That the project returns Rs 1.30 for every Re 1 invested in the project  D.That IRR is 1.30 times that of the Hurdle Rate

Last Answer : C.That the project returns Rs 1.30 for every Re 1 invested in the project

Which of the following statements is correct regarding the internal rate of return (IRR) method? A. Each project has a unique internal rate of return. B. As long as you are not dealing with mutually exclusive projects, capital rationing, or unusual projects having multiple sign changes in the cash-flow stream, the internal rate of return method can be used with reasonable confidence. C. The internal rate of return does not consider the time value of money. D. The internal rate of return is rarely used by firms today because of the ease at which net present value is calculated

Description : Which of the following statements is correct regarding the internal rate of return (IRR) method? A. Each project has a unique internal rate of return. B. As long as you are not dealing with ... of return is rarely used by firms today because of the ease at which net present value is calculated

Last Answer : D. The internal rate of return is rarely used by firms today because of the ease at which net present value is calculated.

Which of the following statements is correct regarding the internal rate of return (IRR) method? A. Each project has a unique internal rate of return. B. As long as you are not dealing with mutually exclusive projects, capital rationing, or unusual projects having multiple sign changes in the cash-flow stream, the internal rate of return method can be used with reasonable confidence. C. The internal rate of return does not consider the time value of money. D. The internal rate of return is rarely used by firms today because of the ease at which net present value is calculated.

Description : Which of the following statements is correct regarding the internal rate of return (IRR) method? A. Each project has a unique internal rate of return. B. As long as you are not dealing with ... of return is rarely used by firms today because of the ease at which net present value is calculated.

Last Answer : D. The internal rate of return is rarely used by firms today because of the ease at which net present value is calculated.

Which of the following statements is correct regarding the internal rate of return (IRR) method? A. Each project has a unique internal rate of return B. As long as you are not dealing with mutually exclusive projects, capital rationing, or unusual projects having multiple sigD. The internal rate of return is rarely used by firms today because of the ease at which net present value is calculatedn changes in the cash-flow stream, the internal rate of return method can be used with reasonable confidence. C. The internal rate of return does not consider the time value of money.

Description : Which of the following statements is correct regarding the internal rate of return (IRR) method? A. Each project has a unique internal rate of return B. As long as you are not dealing with ... of return is rarely used by firms today because of the ease at which net present value is calculated

Last Answer : D. The internal rate of return is rarely used by firms today because of the ease at which net present value is calculated.

Which of the following is true? A. Discounted cash flow analysis is the least precise of the cash flow techniques, because it does not consider the time value of money. B. NPV is the least precise of the cash flow analysis techniques, because it assumes reinvestment at the discount rate. C. Payback period is the least precise of the cash flow analysis techniques, because it does not consider the time value of money. D. IRR is the least precise of the cash flow analysis techniques, because it assumes reinvestment at the cost of capital.

Description : Which of the following is true?  A. Discounted cash flow analysis is the least precise of the cash flow techniques, because  it does not consider the time value of money. B. NPV is ... least precise of the cash flow analysis techniques, because it assumes  reinvestment at the cost of capital.

Last Answer : C. Payback period is the least precise of the cash flow analysis techniques, because it  does not consider the time value of money.

A profitability index (PI) of .92 for a project means that . A. The project's costs (cash outlay) are (is) less than the present value of the project's benefits B. The project's NPV is greater than zero C. The project's NPV is greater than 1 D. The project returns 92 cents in present value for each current rupee invested (cost)

Description : A profitability index (PI) of .92 for a project means that . A. The project's costs (cash outlay) are (is) less than the present value of the project's benefits B. The project's NPV is ... is greater than 1 D. The project returns 92 cents in present value for each current rupee invested (cost)

Last Answer : C. The project's NPV is greater than 1

Which of the following statements is incorrect regarding a normal project? A. If the NPV of a project is greater than 0, then its PI will exceed 1. B. If the IRR of a project is 8%, its NPV, using a discount rate, k, greater than 8%, will be less than 0.C. If the PI of a project equals 0, then the project's initial cash outflow equals the PV of its cash flows. D. If the IRR of a project is greater than the discount rate, k, then its PI will be greater than 1.

Description : Which of the following statements is incorrect regarding a normal project? A. If the NPV of a project is greater than 0, then its PI will exceed 1. B. If the IRR of a project is 8%, its NPV, using ... the IRR of a project is greater than the discount rate, k, then its PI will be greater than 1.

Last Answer : D. If the IRR of a project is greater than the discount rate, k, then its PI will be greater than 1.

In case of the indivisible projects, which of the following may not give the optimum result? A. Internal Rate of Return B. Profitability Index C. Feasibility Set Approach D. All of the above

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A firm is about to undertake a project and has compu10% 130 15% 50 20% -50 What is the approximate IRR of this project? A 20% B 17.5% C 15% D 22.5%ted the NPV of the project using a variety of discount rates: Discount Rate used NPV

Description : A firm is about to undertake a project and has computed the NPV of the project using a variety of discount rates:  Discount Rate used NPV 10% 130  15% 50  20% -50  What is the approximate IRR of this project?  A 20%  B 17.5%  C 15%  D 22.5%

Last Answer : B 17.5%

Which of the following is true regarding IRR?A. IRR assumes reinvestment at the cost of capital. B. IRR is the discount rate when NPV is greater than zero. C. IRR is a constrained optimization method. D. IRR is the discount rate when NPV is equal to zero.

Description : Which of the following is true regarding IRR? A. IRR assumes reinvestment at the cost of capital. B. IRR is the discount rate when NPV is greater than zero. C. IRR is a constrained optimization method. D. IRR is the discount rate when NPV is equal to zero.

Last Answer : D. IRR is the discount rate when NPV is equal to zero.

There are two income-based approaches that are primarily used when valuing a business, the Capitalization of Cash Flow Method and the ___________. a) Net Present Value Method b) IRR Method c) Discounted Cash Flow Method d) Discounted Payback Period

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Which method does not consider the time value of money A. Net present value B. Internal Rate of Return C. Average rate of return D. Profitability Index

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A project has the following cash inflows Rs.34,444; Rs.39,877; Rs.25,000; and Rs.52,800 for years 1 through 4, respectively. The initial cash outflow is Rs.104,000. Which of the following four statements is correct concerning the project internal rate of return (IRR)? A. The IRR is less than 10%. B. The IRR is greater than or equal to 10%, but less than 14%. C. The IRR is greater than or equal to 14%, but less than 18%. D. The IRR is greater than or equal to 18%.

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Last Answer : C. The IRR is greater than or equal to 14%, but less than 18%.

The payback period is the period A. a project takes to pay back the loan taken to purchase the capital assets B. equal to the useful life of the machines C. a project takes to recover its initial cash outflow D. over which the project will be getting operating cash inflows

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Last Answer : C. a project takes to recover its initial cash outflow

The criteria for acceptance of a project on the basis of Profitability Index (PI) is A.PI=0B. PI > 0 C. PI < 0 D. PI > 1

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A Firm is considering undertaking a project that would yield annual profits (after depreciation) of Rs 68,000 for 5 years. The initial outlay of the project would be Rs 800,000 and the project's assets would have a residual value of Rs 50,000 at the end of the project. What would be the accounting rate of return for this project? A 16% B 8.5% C 8.0% D 9.1%

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Last Answer : A 16%

An investment should be accepted if its Net Present Value (NPV) is (A) 0 (B) 1(C) positive (D) negative

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To the nearest rupee, what is the net present value of a replacement project whose cash flows are -Rs.104,000; Rs.34,444; Rs.39,877; Rs.25,000; and Rs.52,800 for years 0 through 4, respectively? The firm has decided to assume that the appropriate cost of capital is 10% and the appropriate risk-free rate is 6%. A. Rs.15,115 B. Rs.26,798 C. Rs.33,346 D. Rs.48,121

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The payback method for the measurement of return on investment (A) Gives a correct picture of profitability (B) Underemphasises liquidity (C) Does not measure the discounted rate of return (D) Takes into account the cash inflows after the recovery of investments

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Which of the following is true regarding NPV? A. NPV assumes reinvestment at the cost of capital. B. NPV decisions should be made based on the highest value for all the selections. C. NPV assumes reinvestment at the prevailing rate. D. NPV assumes reinvestment at the NPV rate.

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Last Answer : A. NPV assumes reinvestment at the cost of capital.

_________ method for profitability evaluation of a project does not account for investment cost due to land. (A) Net present worth (B) Pay out period (C) Discounted cash flow (D) Rate of return on investment

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The cash inflows and (outflows) associated with a project are as follows: At start (120000) , Year1-40000, Year2-50000, Year3-60000, Residual Value(at the end of 3rd year)-20000. The payback period for this project would be: A 2 years and 3 months. B 2 years and 6 months. C 3 years. D 2 years.

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Last Answer : B 2 years and 6 months.

The Scope Baseline is: 1. the original description of the project's end results 2. a summary description of the project's original content and end product, including basic budgetary and time constraint data 3. the original project budget and schedule 4. a and c

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In deciding the optimal level of current assets for the firm, management is confronted with . A. a trade-off between profitability and risk B. a trade-off between liquidity and risk C. a trade-off between equity and debt D. a trade-off between short-term versus long-term borrowing

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Last Answer : A. a trade-off between profitability and risk

The index of efficiency and profitability of the business a) Operating ratio b) Operating profit ratio c) Expense ratio d) Net profit ratio

Description : The index of efficiency and profitability of the business a) Operating ratio b) Operating profit ratio c) Expense ratio d) Net profit ratio

Last Answer : b) Operating profit ratio

Internal Rate of Return (IRR) Calculator?

Description : Internal Rate of Return (IRR) Calculator?

Last Answer : Internal Rate of Return (IRR) CalculatorUse this calculator to determine the annual return of a knowninitial amount, a stream of deposits, plus a known final futurevalue.

The internal rate of return is the discount rate for which the NPV is a) positive b) zero c) negative d) less than 1

Description : The internal rate of return is the discount rate for which the NPV is a) positive b) zero c) negative d) less than 1

Last Answer : b) zero

_____________ may be defined as the excess of present value of project cash inflows over that of out flows. A. Net present value technique. B. Average rate of return. C. Benefit-Cost ratio. D. Internal rate of return

Description : _____________ may be defined as the excess of present value of project cash inflows over that of out flows. A. Net present value technique. B. Average rate of return. C. Benefit-Cost ratio. D. Internal rate of return

Last Answer : A. Net present value technique.

A company is considering investing surplus funds in a project. Calculate the NPV at 10 % discount rate for the following data Project-A Year 0- (100) Year 1-100 Year 2-100 A. 73.5 B. 173.5 C. 273.5 D.100

Description : A company is considering investing surplus funds in a project. Calculate the NPV at  10 % discount rate for the following data  Project-A Year 0- (100) Year 1-100 Year 2-100  A. 73.5  B. 173.5  C. 273.5  D.100

Last Answer : A. 73.5

The internal rate of return - (1) must be less than the interest rate if the firm is to in-vest. (2) makes the present value of profits equal to the present value of costs. (3) falls as the annual yield of an investment rises. (4) is equal to the market interest rate for all the firm's in-vestment.

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Last Answer : (3) falls as the annual yield of an investment rises. Explanation: The internal rate of return on an investment or project is the "annualized effective compounded re-turn rate" or discount rate ... the investment equals the net present value of the benefits (positive cash flows) of the investment.

The internal rate of return (1) must be less than the interest rate if the firm is to invest. (2) makes the present value of profits equal to the present value of costs. (3) falls as the annual yield of an investment rises. (4) is equal to the market interest rate for all the firm’s investment.

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Last Answer : falls as the annual yield of an investment rises.

Which of the following is/are true if a firm has a required rate of return equal to the ROE? I. The amount of earnings retained by the firm does not affect market price or the P/E. II. The firm can increase market price and P/E by increasing the growth rate. III. The P/E ratio is inversely proportional to the ROE of the firm. A. Only (I) above B. Both (I) and (II) above C. Both (I) and (III) above D. Both (II) and (III) above E. All (I), (II) and (III) above

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Last Answer : E. All (I), (II) and (III) above

Fill in the blank. Risk must be considered in the _____ phase and weighed against the potential benefit of the project’s success in order to decide if the project should be chosen. Select one: a. completion b. closeout c. execution d. planning e. initiation

Description : Fill in the blank. Risk must be considered in the _____ phase and weighed against  the potential benefit of the project’s success in order to decide if the project should  be chosen. Select one: a. completion b. closeout c. execution d. planning e. initiation

Last Answer : e. initiation

Once the project is approved and moves into the planninb. The total risk on the project typically reduces as activities are performed without loss. c. Risks must be weighed against the potential benefit of the project’s success in order to decide if the project should be chosen. d. Risks are identified with each major group of activities. e. A risk response plan can be used to identify increasing levels of detailed risk analysisg stage, what happens in the next phase of the project life cycle? Select one: a. Agreements for risk sharing need to be concluded.

Description : Once the project is approved and moves into the planning stage, what happens  in the next phase of the project life cycle? Select one: a. Agreements for risk sharing need to be concluded. ... activities. e. A risk response plan can be used to identify increasing levels of detailed risk analysis

Last Answer : d. Risks are identified with each major group of activities.

Once the project is approved and moves into the planning stage, what happens in the next phase of the project life cycle?Select one: a. Agreements for risk sharing need to be concluded. b. The total risk on the project typically reduces as activities are performed without loss. c. Risks must be weighed against the potential benefit of the project’s success in order to decide if the project should be chosen. d. Risks are identified with each major group of activities. e. A risk response plan can be used to identify increasing levels of detailed risk analysis

Description : Once the project is approved and moves into the planning stage, what  happens in the next phase of the project life cycle? Select one: a. Agreements for risk sharing need to be concluded. ... activities. e. A risk response plan can be used to identify increasing levels of detailed risk analysis

Last Answer : d. Risks are identified with each major group of activities.

Identify the incorrect statement in connection with working capital management. A. Long-term funds are more expensive than short-term funds but also riskier B. The objectives of working capital management are profitability and liquidity C. Permanent current assets should be financed from long-term sources if a moderate or matching policy is adopted D. Conservative financing policies use short-term funds to finance only part of fluctuating current assets E. Aggressive financing policies increase profitability at the cost of higher risk

Description : Identify the incorrect statement in connection with working capital management. A. Long-term funds are more expensive than short-term funds but also riskier B. The objectives of ... fluctuating current assets E. Aggressive financing policies increase profitability at the cost of higher risk

Last Answer : A. Long-term funds are more expensive than short-term funds but also riskier

If a company moves from a "conservative" working capital policy to an "aggress ive" policy, it should expect . A. liquidity to decrease, whereas expected profitability would increase B. expected profitability to increase, whereas risk would decrease C. liquidity would increase, whereas risk would also increase D. risk and profitability to

Description : If a company moves from a "conservative" working capital policy to an "aggress ive"  policy, it should expect . A. liquidity to decrease, whereas expected profitability would increase B. ... decrease C. liquidity would increase, whereas risk would also increase D. risk and profitability to

Last Answer : A. liquidity to decrease, whereas expected profitability would increase

Which of the following is a basic principle of finance as it relates to the management of working capital? A. Profitability varies inversely with risk. B. Liquidity moves together with risk. C. Profitability moves together with risk. D. Profitability moves together with liquidity.

Description : Which of the following is a basic principle of finance as it relates to the management of  working capital? A. Profitability varies inversely with risk. B. Liquidity moves together with risk. C. Profitability moves together with risk. D. Profitability moves together with liquidity.

Last Answer : C. Profitability moves together with risk.

Which of the following is not incorporated in capital budgeting? A. Tax effect B. Time Value of Money C. Required rate of return D. Rate of cashdiscount

Description : Which of the following is not incorporated in capital budgeting? A. Tax effect B. Time Value of Money C. Required rate of return D. Rate of cashdiscount

Last Answer : D. Rate of cashdiscount

All projects are basically ____, requiring huge money for completion and earning no return till their successful completion.

Description : All projects are basically ____, requiring huge money for completion and earning no  return till their successful completion.

Last Answer : Ans. Capital projects

In the stock-price beta estimation for the Coca-Cola Company, the dependent variable is the: A. return on Coca-Cola. B. price of Coca-Cola stock. C. return on the S&P 500. D. value of the S&P 500 Index.

Description : In the stock-price beta estimation for the Coca-Cola Company, the dependent variable is the: A. return on Coca-Cola. B. price of Coca-Cola stock. C. return on the S&P 500. D. value of the S&P 500 Index.

Last Answer : A. return on Coca-Cola.

Which of the following is not a mathematical method for evaluation of profitability of a chemical process plant? (A) Cash reserve (B) Rate of return on investment (C) Payout period (D) Discounted cash flow based on full life performance

Description : Which of the following is not a mathematical method for evaluation of profitability of a chemical process plant? (A) Cash reserve (B) Rate of return on investment (C) Payout period (D) Discounted cash flow based on full life performance

Last Answer : (A) Cash reserve

One of the greatest weaknesses of systems consulting firms is that they try to apply estimates and methodologies that they have developed over time and applied to other projects, most of which are very different from the current project.

Description : One of the greatest weaknesses of systems consulting firms is that they try to apply  estimates and methodologies that they have developed over time and applied to other  projects, most of which are very different from the current project.

Last Answer : Ans: False

According to the PMBOK guide, which of the following statements is right in terms of using reserve analysis to determine a project budget? Select one: A. Reserve analysis always plans contingency reserves for unexpected project scope and project costs, which are part of your project budget. B. Reserves should not be included in the project budget. C. If you only have limited resources, you may completely ignore reserve analysis when you try to determine your project budget. D. Planning contingency reserves for a project is not practical. E. Contingency reserves have never been a concern when planning a project budget.

Description : According to the PMBOK guide, which of the following statements is  right in terms of using reserve analysis to determine a project budget? Select one: A. Reserve analysis always plans ... not practical. E. Contingency reserves have never been a concern when planning a project budget.

Last Answer : A. Reserve analysis always plans contingency reserves for unexpected project scope and  project costs, which are part of your project budget.

Which of the following statements is true of Insured Asset Allocation? A. It is aimed at benefiting from short-term under pricing and over pricing of assets. B. In this strategy the risk tolerance of the investor are ignored. C. In this strategy long-term predictions regarding the capital markets are used. D. In this strategy the asset mix is held constant. E. It is a strategy aimed at achieving the objectives of the investor without depending on market timing.

Description : Which of the following statements is true of Insured Asset Allocation? A. It is aimed at benefiting from short-term under pricing and over pricing of assets. B. In this strategy the risk ... . It is a strategy aimed at achieving the objectives of the investor without depending on market timing

Last Answer : E. It is a strategy aimed at achieving the objectives of the investor without depending on market timing.