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WSU Finance 325 Final Questions with Correct Answers
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WSU Finance 325 Final Questions with Correct Answers
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WSU Finance 325 Final Questions with CorrectAnswers
Which one of the following methods predicts the amount by which the
value of a firm will
change if a project is accepted?
A) Net present value
B) Discounted payback
C) Internal rate of return
D) Profitability index
E) Payback Correct Answer-A) Net present value
If a project has a net present value equal to zero, then:
A) the total of the cash inflows must equal the initial cost of the project.
B) the project earns a return exactly equal to the discount rate.
C) a decrease in the project's initial cost will cause the project to have a
negative NPV.
D) any delay in receiving the projected cash inflows will cause the
project to have a positive
NPV.
E) the project's PI must also be equal to zero. Correct Answer-B) the
project earns a return exactly equal to the discount rate.
The length of time a firm must wait to recoup, in present value terms,
the money it has
,invested in a project is referred to as the:
A) net present value period.
B) internal return period.
C) payback period.
D) discounted profitability period.
E) discounted payback period. Correct Answer-E) discounted payback
period.
The internal rate of return is defined as the:
A) maximum rate of return a firm expects to earn on a project.
B) rate of return a project will generate if the project is financed solely
with internal funds.
C) discount rate that equates the net cash inflows of a project to zero.
D) discount rate which causes the net present value of a project to equal
zero.
E) discount rate that causes the profitability index for a project to equal
zero. Correct Answer-D) discount rate which causes the net present
value of a project to equal zero.
The final decision on which one of two mutually exclusive projects to
accept ultimately
depends upon which one of the following?
A) Initial cost of each project
B) Timing of the cash inflows
C) Total cash inflows of each project
, D) Net present value
E) Length of each project's life Correct Answer-D) Net present value
When the present value of the cash inflows exceeds the initial cost of a
project, then the
project should be:
A) accepted because the payback period is less than the required time
period.
B) accepted because the profitability index is greater than 1.
C) accepted because the profitability index is negative.
D) rejected because the internal rate of return is negative.
E) rejected because the net present value is positive. Correct Answer-B)
accepted because the profitability index is greater than 1.
The difference between a company's future cash flows if it accepts a
project and the
company's future cash flows if it does not accept the project is referred
to as the project's:
A) incremental cash flows.
B) internal cash flows.
C) external cash flows.
D) erosion effects.
E) financing cash flows. Correct Answer-A) incremental cash flows.
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