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1、如有侵权，请联系网站删除，仅供学习与交流公司理财(英文版)题库7【精品文档】第 35 页CHAPTER 7Net Present Value and Other Investment RulesMultiple Choice Questions:I.DEFINITIONSNET PRESENT VALUEa1.The difference between the present value of an investment and its cost is the: present value.b.internal rate of return.c.payback period.d.profit
2、ability index.e.discounted payback period.Difficulty level: EasyNET PRESENT VALUE RULEc2.Which one of the following statements concerning net present value (NPV) is correct?a.An investment should be accepted if, and only if, the NPV is exactly equal to zero.b.An investment should be accepted only if
3、 the NPV is equal to the initial cash flow.c.An investment should be accepted if the NPV is positive and rejected if it is negative.d.An investment with greater cash inflows than cash outflows, regardless of when the cash flows occur, will always have a positive NPV and therefore should always be ac
4、cepted.e.Any project that has positive cash flows for every time period after the initial investment should be accepted.Difficulty level: EasyPAYBACKc3.The length of time required for an investment to generate cash flows sufficient to recover the initial cost of the investment is called the: present
5、 value.b.internal rate of return.c.payback period.d.profitability index.e.discounted cash period.Difficulty level: EasyPAYBACK RULEa4.Which one of the following statements is correct concerning the payback period?a.An investment is acceptable if its calculated payback period is less than some pre-sp
6、ecified period of time.b.An investment should be accepted if the payback is positive and rejected if it is negative.c.An investment should be rejected if the payback is positive and accepted if it is negative.d.An investment is acceptable if its calculated payback period is greater than some pre-spe
7、cified period of time.e.An investment should be accepted any time the payback period is less than the discounted payback period, given a positive discount rate.Difficulty level: EasyDISCOUNTED PAYBACKe5.The length of time required for a projects discounted cash flows to equal the initial cost of the
8、 project is called the: present value.b.internal rate of return.c.payback period.d.discounted profitability index.e.discounted payback period.Difficulty level: EasyDISCOUNTED PAYBACK RULEd6.The discounted payback rule states that you should accept projects:a.which have a discounted payback period th
9、at is greater than some pre-specified period of time.b.if the discounted payback is positive and rejected if it is negative.c.only if the discounted payback period equals some pre-specified period of time.d.if the discounted payback period is less than some pre-specified period of time.e.only if the
10、 discounted payback period is equal to zero.Difficulty level: EasyAVERAGE ACCOUNTING RETURNc7.An investments average net income divided by its average book value defines the average: present value.b.internal rate of return.c.accounting return.d.profitability index.e.payback period.Difficulty level:
11、EasyAVERAGE ACCOUNTING RETURN RULEb8.An investment is acceptable if its average accounting return (AAR):a.is less than a target AAR.b.exceeds a target AAR.c.exceeds the firms return on equity (ROE).d.is less than the firms return on assets (ROA).e.is equal to zero and only when it is equal to zero.D
12、ifficulty level: EasyINTERNAL RATE OF RETURNb.9.The discount rate that makes the net present value of an investment exactly equal to zero is called the:a.external rate of return.b.internal rate of return.c.average accounting return.d.profitability index.e.equalizer.Difficulty level: EasyINTERNAL RAT
13、E OF RETURN RULEd10.An investment is acceptable if its IRR:a.is exactly equal to its net present value (NPV).b.is exactly equal to zero.c.is less than the required return.d.exceeds the required return.e.is exactly equal to 100 percent.Difficulty level: EasyMULTIPLE RATES OF RETURNe11.The possibility
14、 that more than one discount rate will make the NPV of an investment equal to zero is called the _ present value profilingb.operational ambiguityc.mutually exclusive investment decisiond.issues of scalee.multiple rates of returnDifficulty level: MediumMUTUALLY EXCLUSIVE PROJECTSc12.A situation in w
15、hich accepting one investment prevents the acceptance of another investment is called the: present value profile.b.operational ambiguity decision.c.mutually exclusive investment decision.d.issues of scale problem.e.multiple choices of operations decision.Difficulty level: EasyPROFITABILITY INDEXd.13
16、.The present value of an investments future cash flows divided by the initial cost of the investment is called the: present value.b.internal rate of return.c.average accounting return.d.profitability index.e.profile period.Difficulty level: EasyPROFITABILITY INDEX RULEa14.An investment is acceptable
17、 if the profitability index (PI) of the investment is:a.greater than one.b.less than one.c.greater than the internal rate of return (IRR).d.less than the net present value (NPV).e.greater than a pre-specified rate of return.Difficulty level: EasyII.CONCEPTSNET PRESENT VALUEd15.All else constant, the
18、 net present value of a project increases when:a.the discount rate increases.b.each cash inflow is delayed by one year.c.the initial cost of a project increases.d.the rate of return decreases.e.all cash inflows occur during the last year of a projects life instead of periodically throughout the life
19、 of the project.Difficulty level: EasyNET PRESENT VALUEa16.The primary reason that company projects with positive net present values are considered acceptable is that:a.they create value for the owners of the firm.b.the projects rate of return exceeds the rate of inflation.c.they return the initial
20、cash outlay within three years or less.d.the required cash inflows exceed the actual cash inflows.e.the investments cost exceeds the present value of the cash inflows.Difficulty level: EasyNET PRESENT VALUEd17.If a project has a net present value equal to zero, then:I.the present value of the cash i
21、nflows exceeds the initial cost of the project.II.the project produces a rate of return that just equals the rate required to accept the project.III.the project is expected to produce only the minimally required cash inflows.IV.any delay in receiving the projected cash inflows will cause the project
22、 to have a negative net present value.a.II and III onlyb.II and IV onlyc.I, II, and IV onlyd.II, III, and IV onlye.I, II, and III onlyDifficulty level: MediumNET PRESENT VALUEb18.Net present value:a.cannot be used when deciding between two mutually exclusive projects.b.is more useful to decision mak
23、ers than the internal rate of return when comparing different sized projects.c.is easy to explain to non-financial managers and thus is the primary method of analysis used by the lowest levels of management.d.is not an as widely used tool as payback and discounted paybacke.is very similar in its met
24、hodology to the average accounting return.Difficulty level: EasyPAYBACKc19.Payback is frequently used to analyze independent projects because:a.it considers the time value of money.b.all relevant cash flows are included in the analysis.c.it is easy and quick to calculate.d.it is the most desirable o
25、f all the available analytical methods from a financial perspective.e.it produces better decisions than those made using either NPV or IRR.Difficulty level: EasyPAYBACKc20.The advantages of the payback method of project analysis include the:I.application of a discount rate to each separate cash flow
26、.II.bias towards liquidity.III.ease of use.IV.arbitrary cutoff point.a.I and II onlyb.I and III onlyc.II and III onlyd.II and IV onlye.II, III, and IV onlyDifficulty level: MediumPAYBACKd21.All else equal, the payback period for a project will decrease whenever the:a.initial cost increases.b.require
27、d return for a project increases.c.assigned discount rate decreases.d.cash inflows are moved forward in time.e.duration of a project is lengthened.Difficulty level: MediumDISCOUNTED PAYBACKd22.The discounted payback period of a project will decrease whenever the:a.discount rate applied to the projec
28、t is increased.b.initial cash outlay of the project is increased.c.time period of the project is increased.d.amount of each project cash flow is increased.e.costs of the fixed assets utilized in the project increase.Difficulty level: MediumDISCOUNTED PAYBACKa23.The discounted payback rule may cause:
29、a.some positive net present value projects to be rejected.b.the most liquid projects to be rejected in favor of less liquid projects.c.projects to be incorrectly accepted due to ignoring the time value of money.d.projects with negative net present values to be accepted.e.some projects to be accepted
30、 which would otherwise be rejected under the payback rule.Difficulty level: EasyINTERNAL RATE OF RETURNb24.The internal rate of return (IRR):I.rule states that a project with an IRR that is less than the required rate should be accepted.II.is the rate generated solely by the cash flows of an investm
31、ent.III.is the rate that causes the net present value of a project to exactly equal zero.IV.can effectively be used to analyze all investment scenarios.a.I and IV onlyb.II and III onlyc.I, II, and III onlyd.II, III, and IV onlye.I, II, III, and IVDifficulty level: MediumINTERNAL RATE OF RETURNa25.Th
32、e internal rate of return for a project will increase if:a.the initial cost of the project can be reduced.b.the total amount of the cash inflows is reduced.c.each cash inflow is moved such that it occurs one year later than originally projected.d.the required rate of return is reduced.e.the salvage
33、value of the project is omitted from the analysis.Difficulty level: MediumINTERNAL RATE OF RETURNc26.The internal rate of return is:a.more reliable as a decision making tool than net present value whenever you are considering mutually exclusive projects.b.equivalent to the discount rate that makes t
34、he net present value equal to one.c.difficult to compute without the use of either a financial calculator or a computer.d.dependent upon the interest rates offered in the marketplace.e.a better methodology than net present value when dealing with unconventional cash flows.Difficulty level: MediumINT
35、ERNAL RATE OF RETURNa27.The internal rate of return tends to be:a.easier for managers to comprehend than the net present value.b.extremely accurate even when cash flow estimates are faulty.c.ignored by most financial analysts.d.used primarily to differentiate between mutually exclusive projects.e.ut
36、ilized in project analysis only when multiple net present values apply.Difficulty level: EasyINCREMENTAL INTERNAL RATE OF RETURNe28.You are trying to determine whether to accept project A or project B. These projects are mutually exclusive. As part of your analysis, you should compute the incremente
37、d IRR by determining:a.the internal rate of return for the cash flows of each project.b.the net present value of each project using the internal rate of return as the discount rate.c.the discount rate that equates the discounted payback periods for each project.d.the discount rate that makes the net
38、 present value of each project equal to 1.e.the internal rate of return for the differences in the cash flows of the two projects.Difficulty level: MediumINCREMENTAL INTERNAL RATE OF RETURNb29.Graphing the incremental IRR helps explain:a.why one project is always superior to another project.b.how de
39、cisions concerning mutually exclusive projects are derived.c.how the duration of a project affects the decision as to which project to accept.d.how the net present value and the initial cash outflow of a project are related.e.how the profitability index and the net present value are related.Difficul
40、ty level: MediumPROFITABILITY INDEXd30.The profitability index is closely related to:a.payback.b.discounted payback.c.the average accounting present value.e.mutually exclusive projects.Difficulty level: EasyPROFITABILITY INDEXb31.Analysis using the profitability index:a.frequently conflicts with th
41、e accept and reject decisions generated by the application of the net present value rule.b.is useful as a decision tool when investment funds are limited.c.is useful when trying to determine which one of two mutually exclusive projects should be accepted.d.utilizes the same basic variables as those
42、used in the average accounting return.e.produces results which typically are difficult to comprehend or apply.Difficulty level: MediumPROFITABILITY INDEXe32.If you want to review a project from a benefit-cost perspective, you should use the _ method of present valueb.paybackc.internal rate of retur
43、nd.average accounting returne.profitability indexDifficulty level: EasyPROFITABILITY INDEXb33.When the present value of the cash inflows exceeds the initial cost of a project, then the project should be:a.accepted because the internal rate of return is positive.b.accepted because the profitability i
44、ndex is greater than 1.c.accepted because the profitability index is negative.d.rejected because the internal rate of return is negative.e.rejected because the net present value is negative.Difficulty level: EasyMUTUALLY EXCLUSIVE PROJECTSc34.Which one of the following is the best example of two mut
45、ually exclusive projects?a.planning to build a warehouse and a retail outlet side by sideb.buying sufficient equipment to manufacture both desks and chairs simultaneouslyc.using an empty warehouse for storage or renting it entirely out to another firmd.using the company sales force to promote sales of both shoes and sockse.buying both inventory and fixed assets using funds from the same bond issueDifficulty level: MediumMUTUALLY EXCLUSIVE PROJECTSd35.The Liberty Co. is considering two projects. Project A consists of building a wholesale