Escolar Documentos
Profissional Documentos
Cultura Documentos
YourResultsfor"Multiplechoicequestions"
YourResultsfor:"Multiplechoicequestions"
SiteTitle: FundamentalsofFinancial
Management,thirteenthedition
SummaryofResults
29%Correctof21Scoreditems:
BookTitle: FundamentalsofFinancial
Management,thirteenthedition
BookAuthor: VanHorne/Wachowicz
Locationon StudentResources>Chapter13>
Site: Multiplechoicequestions
Printthispage
6Correct:
29%
15Incorrect:
71%
Moreinformationaboutscoring
Date/Time September19,2015at6:19AM
Submitted: (UTC/GMT)
1.
Aprofitabilityindex(PI)of.92foraprojectmeansthat__________.
YourAnswer: theproject'scosts(cashoutlay)are(is)lessthanthe
presentvalueoftheproject'sbenefits
CorrectAnswer: theprojectreturns92centsinpresentvalueforeach
currentdollarinvested(cost)
Thepresentvalueoftheproject'sbenefitsarelessthantheproject'scosts
(cashoutlay).
2.
TheLMNCorporationisconsideringaninvestmentthatwillcost$80,000and
haveausefullifeof4years.Duringthefirst2years,thenetincremental
aftertaxcashflowsare$25,000peryearandforthelasttwoyearstheyare
$20,000peryear.Whatisthepaybackperiodforthisinvestment?
YourAnswer: Cannotbedeterminedfromthisinformation.
CorrectAnswer: 3.5years.
.
Thecumulativecashinflowsforthefourperiodsare$25K,$50K,$70K,and
$90Krespectively.Thus,3fullyearsplus$10Kof$20Kinthefourthyear
leadstoapaybackof3.5years.
3.
BulgingStomachRestaurants,Inc.,hasestimatedthataproposedproject's
8yearnetcashbenefitwillbe$4,000peryearforyears1through8,with
anadditionalterminalbenefitof$8,000attheendoftheeighthyear.
AssumingthatthesecashinflowssatisfyexactlyBulging'srequiredrateof
returnof8percent,theproject'sinitialcashoutflowisclosesttowhichofthe
followingfourpossibleanswers?
YourAnswer: $27,309
4.
http://wps.pearsoned.co.uk/wps/grader
Whichofthefollowingstatementsisincorrectregardinganormalproject?
1/6
19/09/2015
YourResultsfor"Multiplechoicequestions"
YourAnswer: IftheIRRofaprojectisgreaterthanthediscountrate,
k,thenitsPIwillbegreaterthan1.
CorrectAnswer: IfthePIofaprojectequals0,thentheproject'sinitial
cashoutflowequalsthePVofitscashflows.
AnIRRthatexceedsthediscountrateimpliesapositiveNPVprojectwhich
meansthePIexceeds1ifitisanormalproject.
5.
Assumethatafirmhasaccuratelycalculatedthenetcashflowsrelatingto
twomutuallyexclusiveinvestmentproposals.Ifthenetpresentvalueofboth
proposalsexceedzeroandthefirmisnotundertheconstraintofcapital
rationing,thenthefirmshould__________.
YourAnswer: calculatetheIRRsoftheseinvestmentstobecertain
thattheIRRsaregreaterthanthecostofcapital
CorrectAnswer: accepttheproposalthathasthelargestNPVsincethe
goalofthefirmistomaximizeshareholderwealthand,
sincetheprojectsaremutuallyexclusive,wecanonly
takeone
Themaximizinggoalofthefirmsuggestschoosingtheproposalwiththe
largestNPVsincetheprojectsaremutuallyexclusive(i.e.,wecanonlytake
one).
6.
Whatdowecallaformalcomparisonoftheactualcostsandbenefitsofa
projectwithoriginalestimates?
YourAnswer: Businessscorecardreport.
CorrectAnswer: Postcompletionaudit.
Theformalcomparisonisreferredtoasapostcompletionaudit.
7.
Aprojectwhoseacceptancedoesnotpreventorrequiretheacceptanceof
oneormorealternativeprojectsisreferredtoas__________.
YourAnswer: acontingentproject
CorrectAnswer: anindependentproject
Thisisthesameasadependentprojectandrequirestheacceptanceofone
ormoreotherprojects.
8.
Whenoperatingunderasingleperiodcapitalrationingconstraint,youmay
firstwanttotryselectingprojectsbydescendingorderoftheir__________
inordertogiveyourselfthebestchancetoselectthemixofprojectsthat
addsmosttofirmvalue.
YourAnswer: paybackperiod(PBP)
http://wps.pearsoned.co.uk/wps/grader
2/6
19/09/2015
YourResultsfor"Multiplechoicequestions"
CorrectAnswer: profitabilityindex(PI)
Thisstatementregardingtheprofitabilityindex(PI)wouldbe
9.
Whichofthefollowingstatementsregardingcashflowpatterns(fortime
periods0,1,2,3,and4)iscorrect?
YourAnswer: Thesequenceof$50,$50,$70,$60,and$150hasat
mosttwointernalratesofreturn.
10.
Whichofthefollowingstatementsiscorrectregardingtheinternalrateof
return(IRR)method?
YourAnswer: Theinternalrateofreturnisrarelyusedbyfirmstoday
becauseoftheeaseatwhichnetpresentvalueis
calculated.
CorrectAnswer: Aslongasyouarenotdealingwithmutuallyexclusive
projects,capitalrationing,orunusualprojectshaving
multiplesignchangesinthecashflowstream,the
internalrateofreturnmethodcanbeusedwith
reasonableconfidence.
TheIRRisstillwidelyusedbecausefirmsstillliketouseratesratherthan
dollarfigureswhendiscussingprojects.
11.
Whichofthefollowingisnotapotentialforarankingproblembetweentwo
mutuallyexclusiveprojects?
YourAnswer: Thetwoprojectshavecashflowpatternsthatdiffer
dramatically.
CorrectAnswer: Oneofthemutuallyexclusiveprojectsinvolves
replacementwhiletheotherinvolvesexpansion.
Thisisoneofthethreemaindifferencesthatcancauserankingconflicts.
12.
ThediscountrateassociatedwiththesingleintersectionoftheNPVprofilesof
twomutuallyexclusiveprojectsrepresents__________.
YourAnswer: Gordon'srateofreturn
CorrectAnswer: Fisher'srateofintersection
ThisisreferredtoasFischer'srateofintersection.
13.
AnNPVprofileforasingleproject__________.
http://wps.pearsoned.co.uk/wps/grader
3/6
19/09/2015
YourResultsfor"Multiplechoicequestions"
YourAnswer: isgenerallyupwardsloping
CorrectAnswer: displaystheexpectedNPVforaprojectatavarietyof
differentdiscountrates
Itisgenerallydownwardsloping.
14.
Aprojectwhoseacceptanceprecludestheacceptanceofoneormore
alternativeprojectsisreferredtoas__________.
YourAnswer: amutuallyexclusiveproject.
15.
Twomutuallyexclusiveprojectsarebeingconsidered.Neitherprojectwillbe
repeatedagaininthefutureaftertheircurrentlivesarecomplete.There
existsapotentialproblemthoughtheexpectedlifeofthefirstprojectis
oneyearandtheexpectedlifeofthesecondprojectisthreeyears.Thishas
causedtheNPVandIRRmethodstosuggestdifferentprojectpreferences.
Whattechniquecanbeusedtohelpmakeabetterdecisioninthisscenario?
YourAnswer: IgnoretheNPVtechniqueandsimplychoosethehighest
IRRsincemanagersareconcernedaboutmaximizing
returns.
CorrectAnswer: RelyontheNPVmethodandmakeyourchoiceasitwill
tellyouwhichoneisbest.
SimplyrelyontheNPVmethod.
16.
Tothenearestdollar,whatisthenetpresentvalueofareplacementproject
whosecashflowsare$104,000$34,444$39,877$25,000and
$52,800foryears0through4,respectively?Thefirmhasdecidedtoassume
thattheappropriatecostofcapitalis10%andtheappropriateriskfreerate
is6%.
YourAnswer: $15,115
17.
Aprojecthasthefollowingcashinflows$34,444$39,877$25,000and
$52,800foryears1through4,respectively.Theinitialcashoutflowis
$104,000.Whichofthefollowingfourstatementsiscorrectconcerningthe
projectinternalrateofreturn(IRR)?
YourAnswer: TheIRRislessthan10%.
CorrectAnswer: TheIRRisgreaterthanorequalto14%,butlessthan
18%.
18.
http://wps.pearsoned.co.uk/wps/grader
$104,000=$34,444/(1+IRR)1+$39,877/(1+IRR)2+$25,000/(1+
IRR)3+$52,800/(1+IRR)4.Thus,theIRR=16.23%.
4/6
19/09/2015
18.
YourResultsfor"Multiplechoicequestions"
Youmustdecidebetweentwomutuallyexclusiveprojects.ProjectAhascash
flowsof$10,000$5,000$5,000and$5,000foryears0through3,
respectively.ProjectBhascashflowsof$20,000$10,000$10,000and
$10,000foryears0through3,respectively.Thefirmhasdecidedtoassume
thattheappropriatecostofcapitalis10%forbothprojects.Whichproject
shouldbechosen?Why?
YourAnswer: BProjectB'sNPV>ProjectA'sNPV.
19.
Therearetwomutuallyexclusiveprojectsthathavedifferentlives.ProjectA
hasa4yearlifeandProjectBhasa5yearlife.Inreplacementchain
analysis,theearliestcommonlifewilloccurwhenProjectAisreplicated
__________timesandProjectBisreplicated__________times.
YourAnswer: Itisnotpossibletodeterminetheanswersforthis
problem.
CorrectAnswer: 54
Replicating5and4timesrespectivelywillprovidea20yearcommonlife.
20.
Aprojectwhoseacceptancerequirestheacceptanceofoneormore
alternativeprojectsisreferredtoas__________.
YourAnswer: Noneoftheaboveare
CorrectAnswer: adependentproject
Adependentprojectrequirestheacceptanceofoneormoreadditional
projects.
21.
UtilizethefollowingNPVsensitivityanalysistabletoanswerthequestion
below:
Variable
change
SV
PP
10%
20
28
36
5%
29
33
Base
30
30
30
5%
61
31
27
10%
103
32
24
NPVismostsensitivetoachangeinwhichofthethreeinputvariables
productprice(P),salvagevalue(SV),orpurchasepriceoftheasset(PP)?
YourAnswer: "P"
EmailYourResults
http://wps.pearsoned.co.uk/wps/grader
5/6
19/09/2015
YourResultsfor"Multiplechoicequestions"
Mynameis(firstlast):
Emailmyresultsto:
Emailaddress:
Sendas:
Me
Text
Instructor
Text
TA
Text
Other
Text
Help
EmailResults
Copyright19952011PearsonEducation.Allrightsreserved.
LegalNotice|PrivacyPolicy|Permissions
http://wps.pearsoned.co.uk/wps/grader
6/6