29 Jun Question 1) Britannia Company h
as two investment opportunities. A cash flow schedule for the investments is provided below:
Year Investment A Investment B
Year 0 ($5,000) ($6,000)
Year 1 2,000 3,000
Year 2 2,000 2,000
Year 3 2,000 2,000
Year 4 2,000 1,000
Assuming capital rationing is used, which of the following techniques would be most appropriate for choosing between Investment A and Investment B?
A. Payback technique
B. Present value index
C. Net present value technique
D. None of these techniques apply
2) Chartreuse Company has two investment opportunities. Both investments cost $5,000 and will provide the following net cash flows:
Year Investment A Investment B
Year 1 3,000 3,000
Year 2 3,000 4,000
Year 3 3,000 2,000
Year 4 3,000 1,000
The total present value of Investment A’s cash inflows assuming a 10% minimum rate of return is (round to the nearest whole dollar):
[ ( 3000/(1.10)^4) + ( 3000/(1.10)^3) + ( 3000/(1.10)^2) + ( 3000/(1.10)^1)]
A. $10,628
B. $3,452
C. $9,510
D. $3,000
3) An investment that costs $30,000 will produce annual cash flows of $10,000 for a period of 4 years. Given a desired rate of return of 8%, the investment will generate a (round your answer to the nearest whole dollar).
30000 – [ ( 10000/(1.08)^4) + ( 10000/(1.08)^3) + ( 10000/(1.08)^2) + ( 10000/(1.08)^1)]
A. positive net present value of $33,121
B. negative net present value of $33,121
C. positive net present value of $3,121
D. negative net present value of $3,121
4) Which of the following is not a factor in explaining why the present value of a future dollar is less than one dollar?
A. Inflation
B. Historical cost
C. Interest
D. Risk of failure to collect
5) Select the incorrect statement concerning the internal rate of return (IRR) method of evaluating capital projects.
A. The higher the IRR the better.
B. If a project has a positive net present value then its IRR will exceed the hurdle rate.
C. A project whose IRR is less than the cost of capital should be rejected.
D. The internal rate of return is that rate that makes the present value of the initial outlay equal to zero.
6) A capital budget tool that includes the assumption that all cash inflows are reinvested at the firms cost of capital is:
A. The unadjusted rate of return
B. The Net Present Value
C. The accounting rate of return
D. The Modified Internal Rate of Return
7) Cash outflows can be categorized into all of the following groups except
A. opportunity costs associated with selecting a specific capital project.
B. working capital commitments.
C. outflows associated with the initial investment.
D. increases in operating expenses.
8) An investment that cost $48,000 provided annual cash inflows of $9,000 per year for six years. The desired rate of return is 10%. The actual return from the investment was
A. less than the desired rate of return.
B. greater than the desired rate of return.
C. equal to the desired rate of return.
D. the answer cannot be determined from the information provided.
9) An investment that costs $5,000 will produce annual cash flows of $2,000 for a period of 4 years. Given a desired rate of return of 10%, the investment will generate a present value index of
A. 0.789.
Our website has a team of professional writers who can help you write any of your homework. They will write your papers from scratch. We also have a team of editors just to make sure all papers are of HIGH QUALITY & PLAGIARISM FREE. To make an Order you only need to click Ask A Question and we will direct you to our Order Page at WriteDemy. Then fill Our Order Form with all your assignment instructions. Select your deadline and pay for your paper. You will get it few hours before your set deadline.
Fill in all the assignment paper details that are required in the order form with the standard information being the page count, deadline, academic level and type of paper. It is advisable to have this information at hand so that you can quickly fill in the necessary information needed in the form for the essay writer to be immediately assigned to your writing project. Make payment for the custom essay order to enable us to assign a suitable writer to your order. Payments are made through Paypal on a secured billing page. Finally, sit back and relax.
About Writedemy
We are a professional paper writing website. If you have searched a question and bumped into our website just know you are in the right place to get help in your coursework. We offer HIGH QUALITY & PLAGIARISM FREE Papers.
How It Works
To make an Order you only need to click on “Order Now” and we will direct you to our Order Page. Fill Our Order Form with all your assignment instructions. Select your deadline and pay for your paper. You will get it few hours before your set deadline.
Are there Discounts?
All new clients are eligible for 20% off in their first Order. Our payment method is safe and secure.