Corporate Finance MCs Questions and Correct Answers & Latest Updated
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Module
Corporate Finance
Institution
Corporate Finance
Present Value is defined as:
A. Future cash flows discounted to the present at an appropriate discount rate
B. Inverse of future cash flows
C. Present cash flow compounded into the future
D. None of the above
o :## A
The rate of return is also called:
I) discount rate;
II) hurdle rate;
...
The following statements regarding the NPV rule and the rate of return rule are true
Master01: DO NOT COPY AND PASTE!! August 25, 2024 Latest Update
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except:
A. Accept a project if its NPV > 0
B. Reject a project if the NPV < 0
C. Accept a project if its rate of return > 0
D. Accept a project if its rate of return > opportunity cost of capital
o :## C
According to the net present value rule, an investment in a project should be made if the:
A. Net present value is greater than the cost of investment
B. Net present value is greater than the present value of cash flows
C. Net present value is positive
D. Net present value is negative
o :## C
Which of the following statements regarding the net present value rule and the rate of
return rule is not true?
A. Accept a project if NPV > cost of investment
B. Accept a project if NPV is positive
Master01: DO NOT COPY AND PASTE!! August 25, 2024 Latest Update
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C. Accept a project if return on investment exceeds the rate of return on an equivalent
investment in the financial market
D. Reject a project if NPV is negative
o :## A
The opportunity cost of capital for a risky project is
A. The expected rate of return on a government security having the same maturity as the
project
B. The expected rate of return on a well-diversified portfolio of common stocks
C. The expected rate of return on a portfolio of securities of similar risks as the project
D. None of the above
o :## C
A perpetuity is defined as:
A. Equal cash flows at equal intervals of time for a specific number of periods
B. Equal cash flows at equal intervals of time forever
C. Unequal cash flows at equal intervals of time forever
D. None of the above
o :## B
Master01: DO NOT COPY AND PASTE!! August 25, 2024 Latest Update
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