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Question 1

Which one of the following statements concerning net present value (NPV) is correct?


Select one:

Question 2

             You are considering the following two mutually exclusive projects that will not be repeated. The required rate of return is 11.25% for project A and 10.75% for project B. Which project should you accept and why?



 Year Project A Project B


 0 -$48,000 -$126,900


 1 $18,400 $ 69,700


 2 $31,300 $ 80,900


 3 $11,700 $ 0



Select one:

Question 3

You are analyzing the following two mutually exclusive projects and have developed the following information. What is the incremental IRR?


 Project A Project B

 Year Cash Flow Cash Flow

 0 -$84,500 -$76,900

 1 $29,000 $25,000

 2 $40,000 $35,000

 3 $27,000 $26,000


Select one:

Question 4

       If a project has a net present value equal to zero, then:


 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. 


Select one:

Question 5

       The internal rate of return (IRR):


 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.



Select one: