Finance 8

Which one of the following methods of analysis ignores cash flows?

Average accounting return

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 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 indicators 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 internal rate of return is unreliable as an indicator of whether or not an investment should be accepted given which one of the following?

The investment is mutually exclusive with another investment of a different size

Which one of the following statements is correct?

The payback period ignores the time value of money.

If an investment is producing a return that is equal to the required return, the investment's net present value will be:

Zero

The net present value of an investment represents the difference between the investment's:

cost and its market value

The net present value:

decreases as the required rate of return increases.

The internal rate of return is the:

discount rate that results in a zero net present value for the project.

Net present value involves discounting an investment's:

future cash flows.

Both Projects A and B are acceptable as independent projects. However, the selection of either one of these projects eliminates the option of selecting the other project. Which one of the following terms best describes the relationship between Project A and Project B?

Mutually Exclusive

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