Principle Of Finance Final Exam

Capital ______ is the decision-making process for accepting and rejecting projects. Budgeting Net —------- value is a measure of how much value is created or added today by undertaking an investment. Present The basic NPV investment rule is: if the NPV is equal to zero, acceptance or rejection of the project is a matter of indifference accept a project if the NPV is greater than zero. reject a project if its NPV is less than zero. NPV ______ cash flows properly. Discounts Capital Corp is considering a project whose internal rate of return is 14%. If Capital's required return is 14%, the project's NPV is: Zero The internal rate of return is a function of ____ a project's cash flows The point at which the NPV profile crosses the vertical axis is the sum of the cash flows of the project The IRR rule can lead to bad decisions when _____ or _____. projects are mutually exclusive cash flows are not conventional True or false: Some projects, such as mines, have cash outflows followed by cash inflows, which are then followed by cash outflows, giving the project multiple rates of return. True If the IRR is greater than the _______ ________, we should accept the project required return A situation in which taking one investment prevents the taking of another is called a mutually —--------- investment decision. Exclusive The —------ rate is the rate at which the NPVs of two projects are equal. Crossover The IRR can lead to the wrong decision when cash (inflows/outflows) occur before cash (inflows/outflows). True or false: IRR approach may lead to incorrect decisions in comparison of two mutually exclusive projects. True True or false: The MIRR function eliminates multiple IRRs and should replace NPV. False Capital ______ is the decision-making process for accepting and rejecting projects. Budgeting Net —------ value is a measure of how much value is created or added today by undertaking an investment. Present The three attributes of NPV are that it: uses cash flows. discounts the cash flows properly. uses all the cash flows of a project. Which of the following are mutually exclusive investments Two different choices for the assembly lines that will make the same product. A restaurant or a gas station on the same piece of land.