Chapter 05 Net Present Value and Other Investm.DOC

Final Exam (Chapter 7, 8, 9) Name: ______________________________ Multiple Choice Questions (3*33=99…100) ?1.?The difference between the present value of an investment and its cost is the:?A.?net present value.B.?internal rate of return.C.?payback period.D.?profitability index.E.?discounted payback period. ? ? 2. The Winston Co. is considering two mutually exclusive projects with the following cash flows. The crossover rate is _____ and if the required rate is higher than the crossover rate then project _____ should be accepted.???A.?13.94%; AB.?13.94%; BC.?15.44%; AD.?15.44%; BE.?15.86%; A  3.?The discount rate that makes the net present value of an investment exactly equal to zero is called the:?A.?external rate of return.B.?internal rate of return.C.?average accounting return.D.?profitability index.E.?equalizer. ?  ?  4.?Matt is analyzing two mutually exclusive projects of similar size and has prepared the following data. Both projects have 5 year lives.??Matt has been asked for his best recommendation given this information. His recommendation should be to accept:?A.?project B because it has the shortest payback period.B.?both projects as they both have positive net present values.C.?project A and reject project B based on their net present values.D.?project B and reject project A based on other criteria not mentioned in the problem.E.?project B and reject project A based on both the payback period and the average accounting return. ?  5.?Modified internal rate of return:?A.?handles the multiple IRR problem by combining cash flows until only one change in sign change remains.B.?requires the use of a discount rate.C.?does not require the use of a discount rate.D.?Both A and B.E.?Both A and C. ? 6.?A project will have more than one IRR if:?A.?the IRR is positive.B.?the IRR is negative.C.?the NPV is zero.D.?the cash flow pattern exhibits more than one sign change.E.?the cash flow pattern exhibits exactly one sign change