01 Jun Question Practice Quiz 1 1. The Payback period is best defined as:
Question
Practice Quiz 1
1. The Payback period is best defined as:
A) the time it takes to receive cash flows sufficient to cover your initial investment
B) the time period required for total revenue received to equal the initial investment
C) the time Investment period required for the present value of all cash flows to equal the initial
D) the time period required for the NPV to equal zero
2.Calculate the payback period for the following investment: A machine costs $100,000 with installation costs of $15,000. Cash inflows are expected to be 26,000 per yearfor the next seven years.
A) greater than 6 years
B )3.85 years
C) 5 years
D) 4.42 years
3. A problem associated with the payback method is:
A) it usually requires less time to compute than that required by the net present value method
B) it doesn’t consider cash flows after the payback period
C) it assumes that all cash flows are invested at the cost of capital
D) it uses the time value of money concept
4. The value of a business depends on future cash flows.
This value is affected by:
A) the size of the cash flows
B) the timing of the cash flows
C) the riskiness of the cash flows
D) all of the above
5. NPV represents:
A) the percentage return of the project
B) the percentage change represented by the project
C)the dollar change in firm value resulting from undertaking a project
D)the dollar profits added to the firm discounting at the cost of capital
6. An acceptable net present value has a value:
A )= or > 0
B )<0
C )= or <0
D) equal to the IRR
7. Given the following information, calculate the net present value:
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