University:
Bradley University
Course:
ECO 221 | Principles of Microeconomics
Academic year:

2019
Views:

199

Pages:

2
Author:

Prince Sampson

What condition must exist if a bond’s coupon rate is to equal both the bond’s current yield and its yield to maturity? Assume the market rate of interest for this bond is positive. The bond must be priced at par. What is the net present value of a project with the following cash ﬂows if the discount rate is 15 percent?! Which one of the following indicates that an independent project is deﬁnitely acceptable? Proﬁtability index greater than 1.0 Which one of the following statements is correct? The payback method is biased toward short-term projects. In which one of the following situations would the payback method be the preferred method of analysis? Investment funds available only for a limited period of time You were recently hired by a ﬁrm as a project analyst. The owner of the ﬁrm is unfamiliar with ﬁnancial analysis and wants to know only what the expected dollar return is per dollar spent on a given project. Which ﬁnancial method of analysis will provide the information that the owner requests? Proﬁtability index Mary has just been asked to analyze an investment to determine if it is acceptable. Unfortunately, she is not being given sufﬁcient time to analyze the project using various methods. She must select one method of analysis and provide an answer based solely on that method. Which method do you suggest she use in this situation? Net present value Based on the most recent survey information presented in your textbook, CFOs tend to use which two methods of investment analysis the most frequently? Internal rate of return and net present value The proﬁtability index reﬂects the value created per dollar: invested. If a project with conventional cash ﬂows has a proﬁtability index of 1.0, the project will: have an internal rate of return that equals the required return. Which one of the following is true if the managers of a ﬁrm accept only projects that have a proﬁtability index greater than 1.5? The ﬁrm should increase in value each time it accepts a new project. An investment has conventional cash ﬂows and a proﬁtability index of 1.0. Given this, which one of the following must be true? The net present value is equal to zero. Which one of the following will occur when the internal rate of return equals the required return? The proﬁtability index will equal 1.0. You are using a net present value proﬁle to compare Projects A and B, which are mutually exclusive. Which one of the following statements correctly applies to the crossover point between these two? The net present value of Project A equals that of Project B, but generally does not equal zero.

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