fin320 assignment 10

what is the IRR for a project with an initial investment of $500 and subsequent cash inflows of $145 per year for 5 years

13.82%

what is the profitability index for a project with an intial cash outflow of $30 and subsequent cash inflows of $80 in year one and $20 in year two if the discount rate is 12%

2.91

what is the IRR for a project with an initial investment of $50 and subsequent cash inflows of $100 per year for 3 years?

9.70%

the spreadsheet function for calculating net present value is ______.

= NPV (rate, CF1, ..., CFn) + CF0

if a project has multiple internal rates of return, which of the following methods should be used?

NPV and MIRR

____ is a measure of how much value is created or added by undertaking an investment

Net present value

the NPV is ________ if the required return is less than the IRR, and it is _____ if the required return is greater than the IRR

positive, negative

according to the basic IRR rule, we should

reject a project if the IRR is less than the required return

if the IRR is greater than the _____ ____, we should accept the project

required return

internal rate of return (IRR) must be compared to the ____ in order to determine the acceptability of a project.

required return

when calculating NPV, the present value of the nth cash flow is found by dividing the nth cash flow by 1 plus ______ rate raised to the nth power

the discount

True or false: some projects, such as mines, have cash outflows followed by cash inflows and cash outflows, again, giving the project multiple internal rates of return

true whenever subsequent cash flows are both negative and positive, multiple internal rates of return may occur

true or false: a project with non-conventional cash flows will produce two or more IRRs

true. an irr will result for every change in sign in the cash flow stream

a project should be ______ if its NPV is greater than 0

accepted

which of the following are reasons why IRR continues to be used in practice?

businesspeople prefer to talk about rates of return it is easier to communicate information about a proposal with an IRR the IRR of a proposal can be calculate without knowing the appropriate discount rate

which of the following is a disadvantage of the PI?

cannot rank mutually exclusive projects

The combination MIRR method is used by excel MIRR function uses which of the following?

compounding cash inflows to the end of the project discounting all cash outflows to time 0 a financing rate for discounting a reinvestment rate for compounding

which of the following are methods calculating the MIRR of a project

discounting approach combination approach reinvestment approach

in general, NPV is ______.

equal to zero when the discount rate equals the IRR positive for discount rates below IRR negative for discount rates above IRR

the present value of the future cash inflows are divided by the ____ to calculate the profitability index

initial investment

Higher cash flows earlier in a project's life are _______ valuable than higher cash flows later on.

more present value is inversely related to time. cash flows earlier in the project life are more valuable as they can be reinvested

if a firm is evaluating two possible project, both of which require the use of the same production facilities, these projects would be considered ______.

mutually exclusive

which of the following present problems when using the IRR method?

mutually exclusive projects non-conventional cash flows