Q1)Which of the following statement is true? Select one: 1. One must know the di

Question

Q1)Which of the following statement is true?

Select one:

1. One must know the discount rate to compute the NPV of a project but one can compute the IRR without referring to the discount rate.

2. One must know the discount rate to compute the IRR of a project but one can compute the NPV without referring to the discount rate.

3. Payback accounts for time value of money.

4. There will always be one IRR regardless of cash flows.

5. Average accounting return is the ratio of total assets to total net income.

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Q2) The profitability index is the ratio of:

Select one:

1. average net income to average investment.

2. present value of cash flows to initial investment cost.

3. net present value of cash flows to internal rate of return.

4. net present value of cash flows to average accounting return.

5. internal rate of return to current market interest rate.

Explanation / Answer

Q1)Answer : 1 One must know the discount rate to compute the NPV of a project but one can compute the IRR without referring to the discount rate.

Q2)Answer : 2. present value of cash flows to initial investment cost.

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