Corporate Finance Chapter 5 TB
Corporate Finance Chapter 5 TB
Corporate Finance Chapter 5 TB
Corporate Finance (Trường Đại học Kinh tế Thành phố Hồ Chí Minh)
16:38 30/10/2023 TBChap 005 - this is the test bank chap 5 of Corporate Finance class
1. The difference between the present value of an investment and its cost is the:
2. Which one of the following statements concerning net present value (NPV) is correct?
A. An investment should be accepted if, and only if, the NPV is exactly equal to zero.
B. An investment should be accepted only if the NPV is equal to the initial cash flow.
.
D. An investment with greater cash inflows than cash outflows, regardless of when the cash flows
occur, will always have a positive NPV and therefore should always be accepted.
E. Any project that has positive cash flows for every time period after the initial investment should
be accepted.
3. The length of time required for an investment to generate cash flows sufficient to recover the initial
cost of the investment is called the:
D. profitability index.
E. discounted cash period.
5-1
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16:38 30/10/2023 TBChap 005 - this is the test bank chap 5 of Corporate Finance class
4. Which one of the following statements is correct concerning the payback period?
.
B. An investment should be accepted if the payback is positive and rejected if it is negative.
C. An investment should be rejected if the payback is positive and accepted if it is negative.
D. An investment is acceptable if its calculated payback period is greater than some pre-specified
period of time.
E. An investment should be accepted any time the payback period is less than the discounted
payback period, given a positive discount rate.
5. The length of time required for a project's discounted cash flows to equal the initial cost of the
project is called the:
6. The discounted payback rule states that you should accept projects:
A. which have a discounted payback period that is greater than some pre-specified period of time.
B. if the discounted payback is positive and rejected if it is negative.
C. only if the discounted payback period equals some pre-specified period of time.
5-2
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16:38 30/10/2023 TBChap 005 - this is the test bank chap 5 of Corporate Finance class
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exactly equal pages
to zero is called
the:
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A. is exactly equal to its net present your
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(NPV).
B. is exactly equal to zero.
C. is less than the required return.
5-3
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16:38 30/10/2023 TBChap 005 - this is the test bank chap 5 of Corporate Finance class
10. A situation in which accepting one investment prevents the acceptance of another investment is
called the:
11. The present value of an investment's future cash flows divided by the initial cost of the investment
is called the:
E. profile period.
12. An investment is acceptable if the profitability index (PI) of the investment is:
5-4
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16:38 30/10/2023 TBChap 005 - this is the test bank chap 5 of Corporate Finance class
13. All else constant, the net present value of a typical investment project increases when:
14. The primary reason that company projects with positive net present values are considered
acceptable is that:
I. the present value of the cash inflows exceeds the initial cost of the project.
II. the project produces a rate of return that just equals the rate required to accept the project.
III. the project is expected to produce only the minimally required cash inflows.
IV. any delay in receiving the projected cash inflows will cause the project to have a negative net
present value.
5-5
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16:38 30/10/2023 TBChap 005 - this is the test bank chap 5 of Corporate Finance class
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value:
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A. cannot be used when deciding totwoallmutually
between documents
exclusive projects.
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17. Payback is frequently used to analyze independent projects because:
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D. it is the most desirable of all the available analytical methods from a financial perspective.
E. it produces better decisions than those made using either NPV or IRR.
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18. The advantages of the payback method of project analysis include the:
A. I and II only
B. I and III only
D. II and IV only
E. II, III, and IV only
5-6
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16:38 30/10/2023 TBChap 005 - this is the test bank chap 5 of Corporate Finance class
19. All else equal, the payback period for a project will decrease whenever the:
20. The discounted payback period of a project will decrease whenever the:
5-7
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16:38 30/10/2023 TBChap 005 - this is the test bank chap 5 of Corporate Finance class
I. rule states that a typical investment project with an IRR that is less than the required rate should
be accepted.
II. is the rate generated solely by the cash flows of an investment.
III. is the rate that causes the net present value of a project to exactly equal zero.
IV. can effectively be used to analyze all investment scenarios.
A. I and IV only
23. The internal rate of return for a project will increase if:
A. more reliable as a decision making tool than net present value whenever you are considering
mutually exclusive projects.
B. equivalent to the discount rate that makes the net present value equal to one.
5-8
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16:38 30/10/2023 TBChap 005 - this is the test bank chap 5 of Corporate Finance class
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tends to be:
26. You are trying to determine whether to accept project A or project B. These projects are mutually
exclusive. As part of your analysis, you should compute the incremental IRR by determining:
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A. the internal rate of return for Share
the cashyour
flowsdocuments to unlock
of each project.
B. the net present value of each project using the internal rate of return as the discount rate.
C. the discount rate that equates the discounted payback periods for each project.
D. the discount rate that makes the net present value of each project equal to 1.
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27. Graphing the NPVs of mutuallyGet 30 days
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projects freedifferent
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demonstrate:
A. how the incremental IRR varies with changes in the discount rate.
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C. how the duration of a project affects the decision as to which project to accept.
D. how the payback period and the initial cash outflow of a project are related.
E. how the profitability index and the net present value are related.
5-9
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16:38 30/10/2023 TBChap 005 - this is the test bank chap 5 of Corporate Finance class
A. payback.
B. discounted payback.
C. average accounting return.
A. frequently conflicts with the accept and reject decisions generated by the application of the net
present value rule.
.
C. cannot be used to aid capital rationing.
D. utilizes the same basic variables as those used in the average accounting return.
E. produces results which typically are difficult to comprehend or apply.
30. If you want to review a project from a benefit-cost perspective, you should use the _______ method
of analysis.
5-10
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16:38 30/10/2023 TBChap 005 - this is the test bank chap 5 of Corporate Finance class
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