13. The internal rate of return method assumes that all cash inflows can be imme
ID: 2567052 • Letter: 1
Question
13. The internal rate of return method assumes that all cash inflows can be immediately reinvested in new projects at the A. Cost of the corporation's common stock. B. Hurdle rate. M C. Internal rate of returm D. Cost of the corporation's long-term debt 14. If the profitability index for a project is equal to 1.13, then the project's A. Net present value is positive. B. Internal rate of return of the project is less than the hurdle rate C. Payback period is less than 5 years. D. Accounting rate of return is greater than the project's internal rate of return 15. Which of the following statements is TRUE regarding the concept of the time value of money? A. A dollar paid today is worth the same as a dollar paid in the future B. A dollar received today is worth the same as a dollar received in the future. C. A dollar received today is worth more than a dollar received in the future. D. A dollar received today is worth less than a dollar received in the future. If a proposed investment's net present value (NPV) is positive, then: A. The investment provides a return greater than the hurdle rate B. The investment provides a return less than the hurdle rate C. The present value of the cash outflows must have been greater than the present 16. value of the cash inflows. D. The investment should be rejected as unacceptable.Explanation / Answer
13) Internal Rate of Return is that rate of return at which the net present value of the project is zero always. The intermediate cashflows are also assumed to be invested at IRR.
Answer - C. Internal rate of Return.
14) Profitabilitiy index = Present values of Inflow / Cashoutflows
Thus, if the profitability index of a project is equal to 1.13, then the project's
A) Net present value is positive.
15) The following concept is true regarding the time value of Money:
C) A dollar received today is worth more than a dollar received in the future.
16) If a proposed investment's net present value is positive, then:
A) The investment provides a return greater than the hurdle rate.
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