D076 Unit 6 Question and answers
already passed 2025/2026
Why is it important to have an accurate, carefully calculated required rate of return as part of the NPV? -
correct answer ✔An inaccurate required rate estimate could cause a firm to reject good projects or
accept bad projects.
A company is trying to decide which of four projects to invest in.
Project 1 has an IRR of 14% and an NPV of $54,000.
Project 2 has an IRR of 11% and an NPV of $67,000.
Project 3 has an IRR of 9% and an NPV of $60,000.
Project 4 has an IRR of 13% and an NPV of $47,000.
If the company can do only one project, which project should it choose to add the greatest value to the
firm? - correct answer ✔Project 2 The project with the highest NPV will bring the most value to the
company.
The company Betsy's Wigs is considering three potential projects that are not mutually exclusive. The
IRR, NPV, and PI for each project are listed in the table below. Use this information to rank the projects
in the order in which Betsy's Wigs should accept them to bring the most value to the firm.
Project IRR NPV PI
Project 1 23% $820 1.02
Project 2 18% $880 1.27
Project 3 21% $790 1.35 - correct answer ✔Project 3, Project 2, Project 1
The projects with the highest PIs should be accepted first.
The YTM of a bond went from 8% to 7%. What can be predicted about the price of the bond? - correct
answer ✔It will increase.
, A potential project to expand the size of an apartment complex will cost $100,000. Its calculated net
present value is $5,000. Given this information, which statement is correct? - correct answer ✔The
project should be accepted because it has a positive NPV.
A company is considering five projects that are not mutually exclusive. However, the company does not
have enough money to do all of them. In order to prioritize projects that fit within the company's
budget, which capital budgeting method should be used? - correct answer ✔Profitability index (PI)
Which scenario is an example of an opportunity cost that is not associated with cash flows? - correct
answer ✔Albert decides to stay home and study for his test instead of going to the movies.
Which condition indicates that an investment will add value to a company? - correct answer ✔The
present value of the benefits of the investment outweigh the present value of the costs of the
investment.
How do corporations and purchasers of financial securities view returns? - correct answer ✔Purchasers
of financial securities look at returns as the amount of money they require in order to lend or give their
money to the corporation that issued those securities.
What is an opportunity cost? - correct answer ✔The loss of the ability to use an asset toward the next
best project once you have invested it in another project
What would an analyst predict for a potential investment with an NPV of zero? - correct answer ✔The
project would earn exactly the rate of return required by the firm.
A financial analyst for the company Bobby's Books has been asked to evaluate a potential investment
using a method that considers the time value of money. Is there more than one way to do this? - correct
answer ✔Yes, the analyst could use both the NPV and the IRR.
already passed 2025/2026
Why is it important to have an accurate, carefully calculated required rate of return as part of the NPV? -
correct answer ✔An inaccurate required rate estimate could cause a firm to reject good projects or
accept bad projects.
A company is trying to decide which of four projects to invest in.
Project 1 has an IRR of 14% and an NPV of $54,000.
Project 2 has an IRR of 11% and an NPV of $67,000.
Project 3 has an IRR of 9% and an NPV of $60,000.
Project 4 has an IRR of 13% and an NPV of $47,000.
If the company can do only one project, which project should it choose to add the greatest value to the
firm? - correct answer ✔Project 2 The project with the highest NPV will bring the most value to the
company.
The company Betsy's Wigs is considering three potential projects that are not mutually exclusive. The
IRR, NPV, and PI for each project are listed in the table below. Use this information to rank the projects
in the order in which Betsy's Wigs should accept them to bring the most value to the firm.
Project IRR NPV PI
Project 1 23% $820 1.02
Project 2 18% $880 1.27
Project 3 21% $790 1.35 - correct answer ✔Project 3, Project 2, Project 1
The projects with the highest PIs should be accepted first.
The YTM of a bond went from 8% to 7%. What can be predicted about the price of the bond? - correct
answer ✔It will increase.
, A potential project to expand the size of an apartment complex will cost $100,000. Its calculated net
present value is $5,000. Given this information, which statement is correct? - correct answer ✔The
project should be accepted because it has a positive NPV.
A company is considering five projects that are not mutually exclusive. However, the company does not
have enough money to do all of them. In order to prioritize projects that fit within the company's
budget, which capital budgeting method should be used? - correct answer ✔Profitability index (PI)
Which scenario is an example of an opportunity cost that is not associated with cash flows? - correct
answer ✔Albert decides to stay home and study for his test instead of going to the movies.
Which condition indicates that an investment will add value to a company? - correct answer ✔The
present value of the benefits of the investment outweigh the present value of the costs of the
investment.
How do corporations and purchasers of financial securities view returns? - correct answer ✔Purchasers
of financial securities look at returns as the amount of money they require in order to lend or give their
money to the corporation that issued those securities.
What is an opportunity cost? - correct answer ✔The loss of the ability to use an asset toward the next
best project once you have invested it in another project
What would an analyst predict for a potential investment with an NPV of zero? - correct answer ✔The
project would earn exactly the rate of return required by the firm.
A financial analyst for the company Bobby's Books has been asked to evaluate a potential investment
using a method that considers the time value of money. Is there more than one way to do this? - correct
answer ✔Yes, the analyst could use both the NPV and the IRR.
