31) You have been asked to analyze a capital investment proposal. The project’s
ID: 2666586 • Letter: 3
Question
31) You have been asked to analyze a capital investment proposal. The project’s cost is $2,775,000. Cash inflows are projected to be $925,000 in Year 1; $1,000,000 in Year 2; $1,000,000 in Year 3; $1,000,000 in Year 4; and $1,225,000 in Year 5. Assume that your firm discounts capital projects at 15.5%. What is the project’s MIRR?A. 19.99%
B. 10.44%
C. 12.62%
D. 16.73%
32) Many firms today continue to use the payback method but employ the NPV or IRR methods as secondary decision methods of control for risk.
A. True
B. False
33) Which of the following is considered to be a deficiency of the IRR?
A. It is not useful in accounting for risk in capital budgeting.
B. It could produce more than one rate of return.
C. It fails to properly rank capital projects.
D. It fails to utilize the time value of money.
34) The NPV assumes cash flows are reinvested at the:
A. cost of capital.
B. NPV.
C. IRR.
D. real rate of return.
35) The firm should accept independent projects if:
A. the NPV is greater than the discounted payback.
B. the profitability index is greater than 1.0.
C. the payback is less than the IRR.
D. the IRR is positive.
36) ABC Service can purchase a new assembler for $15,052 that will provide an annual net cash flow of $6,000 per year for five years. Calculate the NPV of the assembler if the required rate of return is 12%. (Round your answer to the nearest $1.)
A. $6,577
B. $4,568
C. $1,056
D. $7,621
Explanation / Answer
31) You have been asked to analyze a capital investment proposal. The project’s cost is $2,775,000. Cash inflows are projected to be $925,000 in Year 1; $1,000,000 in Year 2; $1,000,000 in Year 3; $1,000,000 in Year 4; and $1,225,000 in Year 5. Assume that your firm discounts capital projects at 15.5%. What is the project’s MIRR? A. 19.99% 32) Many firms today continue to use the payback method but employ the NPV or IRR methods as secondary decision methods of control for risk. B. False 33) Which of the following is considered to be a deficiency of the IRR? B. It could produce more than one rate of return. 34) The NPV assumes cash flows are reinvested at the: A. cost of capital. 35) The firm should accept independent projects if: A. the NPV is greater than the discounted payback. 36) ABC Service can purchase a new assembler for $15,052 that will provide an annual net cash flow of $6,000 per year for five years. Calculate the NPV of the assembler if the required rate of return is 12%. (Round your answer to the nearest $1.) A. $6,577
Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.