FIN 310 CH 8
based on the most recent survey information presented in your textbook CFO's tend to use which 2 methods of investment analysis the most frequently
internal rate of return and net present value
the profitability index reflects the value created per dollar
invested
the possibility that more than one discount rate can cause the net present value of an investment to equal zero is referred to as
multiple rates of return
you were recently hired by a firm as a project analyst, the owner of the firm is unfamiliar with financial analysis
profitability index
which one of the following indicated that a project is definitely acceptable
profitability index greater than 1.0
which one of the following indicates that a project should be rejected
profitability index less than 1.0
the average net income of a project divided by the projects average book value is referred to as the projects
average accounting return
which one of the analytical methods is based on net income
average accounting return
which one of the following methods of analysis ignores cash flows
average accounting return
which one of the following methods of anaylsis is most similar to computing the return on assets
average accounting return
the reinvestment approach to the modified internal rate of return
compounds all the cash flows except for the initial cash flow to the end of the project
The net present value of an investment represents the difference between the incestment's
cost and its market value
the net present value
decreases as the required rate of return increases
the net present value profile illustrates how the net present value of an investment is affected by which one of the following
discount rate
which one of the following defines the internal rate of return for a project
discount rate which results in a zero net present value for the project
which one of the following is the primary advantage of payback analysis
ease of use
discounted cash flow valuation is the process of discounting an investments
future cash flow
which one of the following statements is correct
if the internal rate of return equals the required return, the net present value will equal zero
which one of the following is most closely related to the net present value profile
internal rate of return
in which one of the following situations would the payback method be the preferred method of analysis
investment funds available only for a limited period of time
payback is best used to evaluate which type of projects
low-cost, short-term
the average accounting return
measures profitability rather than cash flow
which one of the following is specifically designed to compute the rate of return on a project that has unconventional cash flows
modified internal rate of return
both project A and B are acceptable as independent projects....
mutually exclusive
Mary has just been asked to analyze an investment to determine if it is acceptable....
net present value
which one of the following is generally considered to be the best form of analysis if you have to select a single method to analyze a variety of investment opportunities
net present value
which one of the following methods of analysis is most appropriate to use when two investments are mutually exculsive
net present value
which one of the following methods of analysis has the greatest bias towards short term projects
payback
which one of the following methods of analysis ignore the time value of money
payback
which one of the following indicates that a project is expected to create value for its owners
positive net present value
which one of the following inidators offers the best assurance that a project will produce value for its owners
positive npv
which one of the following can be defined as a benefit-cost ratio
profitability index
the payback period is the length of time it takes an investment to generate sufficient cash flow to enable the project to
recoup its initial cost
which one of the following statements is correct
the payback method is biased towards short term projects
which one of the following statements is correct?
the payback period ignores the time value of money
the payback method of analysis ignores which one of the following
time value of money
the modified internal rate of return is specifically designed to address the problems associated with which one of the following
unconventional cash flows
if an investment is producing a return that is equal to the required return the investments net present value will be
zero