FNAN 522 Module 4 Homework Questions & Answers.

Question 1 Correct Mark 1.00 out of 1.00 Started on Monday, 18 November 2019, 7:27 AM State Finished Completed on Monday, 18 November 2019, 5:01 PM Time taken 9 hours 34 mins Grade 20.00 out of 20.00 (100%) A company is analyzing a variety of potential investments using different capital budgeting methods. Which of the following represents the most profitable choice based on the information provided? Select one: a. The company picks a project with an NPV of $250,000 over one with an NPV of $300,000. b. The company picks a project with a 5 year payback period over one with a 3 year payback period. c. The company picks a project with profitability index of 1.25 over a project with a PI of -.25. d. The company picks a project with an accounting rate of return 5% over one with an ARR of 3%. FNAN522-020_860- Question 2 Correct Mark 1.00 out of 1.00 Question 3 Correct Mark 1.00 out of 1.00 Question 4 Correct Mark 1.00 out of 1.00 A firm is trying to choose the most profitable project to invest in. Which of the following should be used as the company's discount rate? Select one: a. The projects' average internal rate of return. b. The company's profitability index. c. The company's reinvestment rate or weighted average cost of capital. d. The company's weighted average cost of capital. Calculate the discounted payback period for a project with a discount rate of 5% the following cash flows:Year 0: -$2000Year 1: $1000Year 2: - $1000Year 3: $1000Year 4: $3000Year 5: $2000 Select one: a. 4.44 years. b. 3.56 years. c. 3.44 years. d. 4 years. In which of the following situations would it be appropriate to use the IRR method to make an investment decision? Select one: a. All of these answers. b. To compare two projects that have an equal initial investment and lifespan. c. To compare two investments that have different durations. d. To assess a project which cash flows fluctuate between positive and negative. Question 5 Correct Mark 1.00 out of 1.00 Question 6 Correct Mark 1.00 out of 1.00 Question 7 Correct Mark 1.00 out of 1.00 The tax rate that applies to the last dollar of the tax base and is often applied to the change in one's tax obligation as income rises is called _____. Select one: a. the statutory tax rate b. the effective tax rate c. the marginal tax rate d. the average tax rate When evaluating the cash flows from a project, a financial manager needs to analyze the: Select one: a. costs, benefits, and opportunity costs of the project. b. The costs and benefits of the project only c. The benefits of the project only d. The costs of the project only Which of the following describes an advantage the internal rate of return has over net present value for capital budgeting purposes? Select one: a. All of these answers. b. The IRR method recognizes the firm's opportunity costs. c. The IRR method adjusts for the riskiness (or uncertainty) of the projected cash flows d. Internal rate of return is an indicator of the efficiency, quality or yield of an investment.