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