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finance homework mcq eco282




Question;1. Which of;the following investment rules does not use the time value of the money;concept?;a. Net;present value;b. Internal;rate of return;C. The payback period;d. All of;the above use the time value concept;2. Suppose a;firm has a $100 million in excess cash. It could;a. Invest;the funds in projects with positive NPVs;b. Pay high;dividends to the shareholders;c. Buy;another firm D. All of the above;3. The;following are measures used by firms when making capital budgeting decisions;except;a. Payback;period;b. Internal;rate of return;C. P/E ratio;d. Net;present value;4. The;survey of CFOs indicates that NPV method is always, or almost always, used for;evaluating investment projects by;a. 12% of;firms;b. 20% of;firms;c. 57% of;firms;D. 75% of firms;5. The;survey of CFOs indicates that IRR method is used for evaluating investment;projects by;a. 12% of;firms;b. 20% of;firms;C. 76% of firms;d. 57% of;firms;6. Which of;the following investment rules has value adding-up property?;a. The;payback period method;B. Net present value method;1 The book;rate of return method;2 The;internal rate of return method;28;Junjie Liu ? Econ 282 Practice;Multiple Choice;7. If the;net present value (NPV) of project A is +$100, and that of project B is +$60;then the net present value of the combined project is;a. +$100;b. +$60;C. +$160;d. None of;the above;1 If the;NPV of project A is +$30 and that of project B is -$60, then the NPV of the;combined project is;a. +$30;b. -$60;C. -$30;d. None of;the above;9. You are;given a job to make a decision on project X, which is composed of three;independent projects A, B, and C which have NPVs of +$70, -$40 and +$100;respectively. How would you go about making the decision about whether to;accept or reject the project?;a. Accept;the firm's joint project as it has a positive NPV;b. Reject;the joint project;C. Break up the project into its components: accept A and C;and reject B;d. None of;the above;10. If the NPV;of project A is +$120, and that of project B is -$40 and that of project C is;+$40, what is the NPV of the combined project?;a. +$100;b. -$40;c. +$70;D. +$120;11. The net;present value of a project depends upon;a. Company's;choice of accounting method;b. Manager's;tastes and preferences;C. Project's cash flows and opportunity cost of capital;d. All of;the above;12. Which of;the following investment rules may not use all possible cash flows in its;calculations?;a. NPV;B. Payback period;c. IRR;d. All of;the above;29;Junjie Liu ? Econ 282 Practice;Multiple Choice;13. The;payback period rule;a. Varies;the cut-off point with the interest rate;b. Determines;a cut-off point so that all projects accepted by the NPV rule will be accepted;by the payback period rule;C. Requires an arbitrary choice of a cut-off point;d. Both A;and C;14. The payback;period rule accepts all projects for which the payback period is;a. Greater;than the cut-off value;B. Less than the cut-off value;c. Is;positive;d. An;integer;15. The main;advantage of the payback rule is;a. Adjustment;for uncertainty of early cash flows B. It is simple to use;c. Does not;discount cash flows;d. Both A;and C;16. The;following are disadvantages of using the payback rule except;a. The;payback rule ignores all cash flow after the cutoff date;b. The;payback rule does not use the time value of money C. The payback period is easy;to calculate and use;d. The;payback rule does not have the value additive property;17. Which of;the following statements regarding the discounted payback period rule is true?;A. The discounted payback rule uses the time value of money concept;b. The;discounted payback rule is better than the NPV rule;c. The;discounted payback rule considers all cash flows;d. The;discounted payback rule exhibits the value additive property;18. Given the;following cash flows for project A: C0= -1000, C1= +600, C2= +400, and C3=;+1500, calculate the payback period.;a. One year;B. Two years;c. Three;years;d. None of;the above;19. The cost;of a new machine is $250,000. The machine has a 3-year life and no salvage;value. If the cash flow each year is equal to 40% of the cost of the machine;calculate the payback period for the project;a. 2 years;B. 2.5 years;c. 3 years;d. Cannot be;determined because of insufficient data;30;20. Given the following cash flows for project Z: C 0=;-1,000, C1= 600, C2= 720 and C3= 2000, calculate the discounted payback period;for the project at a discount rate of 20%.;a. 1 year B.;2 years;c. 3 years;d. None of;the above;21. Internal;rate of return (IRR) method is also called;a. Discounted;payback period method;B. Discounted cash-flow (DCF) rate of return method;c. Modified;internal rate of return (MIRR) method;d. None of;the above;22. The;quickest way to calculate the internal rate of return (IRR) of a project is by;a. Trial and;error method;b. Using the;graphical method;C. Using a financial calculator;d. Guessing;the IRR;23. If an;investment project (normal project) has IRR equal to the cost of capital, the;NPV for that project is;a. Positive;b. Negative;c. Zero;D. Unable to determine;24. Given the;following cash flows for Project M: C0= -1,000, C1= +200, C2= +700, C3= +698;calculate the IRR for the project.;A. 23%;b. 21%;c. 19%;d. None of;the above;25. The IRR is;defined as;A. The discount rate that makes the NPV equal to zero;b. The;difference between the cost of capital and the present value of the cash flows;c. The;discount rate used in the NPV method;d. The;discount rate used in the discounted payback period method


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