# Weighing Net Present Value And Other Capital Budgeting Criteria This question bank verified by Studydeets
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Question 1
Free
Multiple Choice

## Of the capital budgeting techniques discussed, which works equally well with normal and non-normal cash flows and with independent and mutually exclusive projects?

Payback period

Discounted payback period

Modified internal rate of return

Net present value

Question 2
Free
Multiple Choice

years.

currency.

a percentage.

time lines.

Question 3
Free
Multiple Choice

## The net present value decision technique may not be the only pertinent unit of measure if the firm is facing:

time or resource constraints.

a labor union.

the election of a new board of directors.

a major investment.

Question 4
Free
Multiple Choice

## All capital budgeting techniques:

render the same investment decision.

use the same measurement units.

include all crucial information.

exclude some crucial information.

Question 5
Free
Multiple Choice

## Rate-based statistics represent summary cash flows, and these summaries tend to lose which two important details?

The investment size and cash inflows that occur after the rather arbitrary testing period

The investment size and the cash inflows that occur before the testing period

The investment size and the cash outflows that occur before the testing period

The investment size and the cash inflows that occur during the testing period

Question 6
Multiple Choice

## 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
Internal rate of return
Net present value
Profitability index
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Question 7
Multiple Choice

## 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?

Payback
Discounted payback
Net present value
Profitability index
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Question 8
Multiple Choice

## Which of the following is a technique for evaluating capital projects that is particularly useful when firms face time constraints in repaying investors?

Payback
Internal rate of return
Net present value
Profitability index
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Question 9
Multiple Choice

## Neither payback period nor discounted payback period techniques for evaluating capital projects account for:

time value of money.
market rates of return.
cash flows that occur after payback.
cash flows that occur during payback.
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Question 10
Multiple Choice

## When choosing between two mutually exclusive projects using the payback period method for evaluating capital projects, one would choose:

either project if they both are more than managers' maximum payback period.
neither project if they both are less than managers' maximum payback period.
the project that pays back the soonest.
the project that pays back the soonest if it is equal to or less than managers' maximum payback period.
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Question 11
Multiple Choice

## 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?

Internal rate of return (IRR)
Modified internal rate of return (MIRR)
Profitability index (PI)
Net present value (NPV)
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Question 12
Multiple Choice

## The benchmark for the profitability index (PI) is the:

cost of capital.
managers' maximum number of years.
zero or anything larger than zero.
zero or anything less than zero.
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Question 13
Multiple Choice

## Which of these describe groups or pairs of projects where you can accept one but not all?

Dependent
Independent
Mutually exclusive
Mutually dependent
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Question 14
Multiple Choice

## 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?

Expected cash flows
Time line cash flows
Non-normal cash flows
Normal cash flows
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Question 15
Multiple Choice

## 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?

Discounted payback
Net present value
Internal rate of return
Profitability index
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Question 16
Multiple Choice

## Which of these is a capital budgeting technique that generates decision rules and associated metrics for choosing projects based upon the implicit expected geometric average of a project's rate of return?

Discounted payback
Net present value
Internal rate of return
Profitability index
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Question 17
Multiple Choice

## Which of the following is a capital budgeting technique that converts a project's cash flows using a more consistent reinvestment rate prior to applying the Internal Rate of Return, IRR, decision rule?

Discounted payback
Net present value
Modified internal rate of return
Profitability index
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Question 18
Multiple Choice

## A graph of a project's ________ is a function of cost of capital.

internal rate of return
net present value
modified internal rate of return
all choices are a function of cost of capital
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Question 19
Multiple Choice

## Compute the NPV for Project X and accept or reject the project with the cash flows shown as follows if the appropriate cost of capital is 10 percent. Time: \$12.93
\$14.22
\$62.07
\$136.90
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Question 20
Multiple Choice
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