FIN 3340 Ch 13 quiz
Which of the following best describes the NPV profile?
A graph of a project's NPV as a function of possible capital costs.
Which of the following statements is correct?
A weakness of both payback and discounted payback is that neither accounts for cash flows received after the payback.
A disadvantage of the payback statistic is that
All of these choices are correct.
Which of the following is a technique for evaluating capital projects that tells how long it will take a firm to earn back the money invested in a project plus interest at market rates?
Discounted payback
A capital budgeting technique that generates a decision rule and associated metric for choosing projects based on the total discounted value of their cash flows is referred to as
NPV.
Which of these is a capital budgeting technique that generates a decision rule and associated metric for choosing projects based on the total discounted value of their cash flows?
Net present value
Which of these are sets of cash flows where all the initial cash flows are negative and all the subsequent ones are either zero or positive?
Normal cash flows
The least-used capital budgeting technique in industry is
Payback
Which of the following is a technique for evaluating capital projects that is particularly useful when firms face time constraints in repaying investors?
Payback
Which of the following is a technique for evaluating capital projects that tells how long it will take a firm to earn back the money invested in a project?
Payback
Which rate-based decision statistic measures the excess return (the amount above and beyond the cost of capital for a project), rather than the gross return?
Profitability index (PI)
When choosing a capital budgeting technique(s) to use, which of the following sub-choices is affected?
all of the above
We accept projects with a positive NPV because it means that
all of the options.
Which of the following statements regarding payback (PB) is/are true?
both a and b are true
A project's IRR is the interest rate that
causes the project's NPV to equal zero.
The net present value decision technique uses a statistic denominated in
currency.
A graph of a project's ________ is a function of cost of capital.
net present value
The benchmark for the profitability index (PI) is the
one or anything larger than one.