FIN202 Chap 10 Exam Latest Update
b - ANSWER QN=212 (20470) Which one of the following statements is NOT true?
a. Accepting a positive-NPV project increases shareholder wealth.
b. Accepting a negative-NPV project has no impact on shareholder wealth.
c. Accepting a negative-NPV project decreases shareholder wealth.
d. Managers are indifferent about accepting or rejecting a zero NPV project.
b - ANSWER QN=213 (20462) Which of the following are aspects of independent
projects?
a. Their cash flows are related.
b. Their cash flows are unrelated.
c. Selecting one would automatically eliminate accepting the other.
d. None of these.
c - ANSWER QN=214 (20463) Two projects are considered to be independent if
a. (i) selecting one would have no bearing on accepting the other.
b. (ii) their cash flows are unrelated.
c. Both (i) and (ii).
d. None of these.
c - ANSWER QN=215 (20477) Advantages of the payback method include the
following.
a. (i) The technique is simple for managers to compute and interpret.
b. (ii) It is a good measure of liquidity risk.
c. Both (i) and (ii).
d. None of these.
c - ANSWER QN=216 (20483) Which one of the following cash flow patterns is NOT an
unconventional cash flow pattern?
a. A positive initial cash flow is followed by negative future cash flows.
b. Future cash flows from a project could include both positive and negative cash flows.
c. A negative initial cash flow is followed by positive future cash flows.
d. A cash flow stream looks similar to a conventional cash flow stream except for a final
negative cash flow.
, d - ANSWER QN=217 (20473) The net present value
a. uses the discounted cash flow valuation technique.
b. will provide a direct measure of how much the firm value will change because of the
capital project.
c. is consistent with shareholder wealth maximization goal.
d. all of these.
c - ANSWER QN=218 (20466) Contingent projects would imply that
a. (i) the acceptance of one project is dependent on the acceptance of the other.
b. (ii) the projects can be either mandatory or optional.
c. Both (i) and (ii).
d. None of these.
b - ANSWER QN=219 (20469) Capital rationing implies that
a. funding resources exceed funding needs.
b. funding needs exceed funding resources.
c. funding needs equal funding resources.
d. none of these.
b - ANSWER QN=220 (20480) The internal rate of return is
a. (i) the discount rate that makes the NPV greater than zero.
b. (ii) the discount rate that makes the NPV equal to zero.
c. (iii) the discount rate that makes the NPV less than zero.
d. both (i) and (iii).
a - ANSWER QN=221 (20479) Which one of the following statements about IRR is NOT
true?
a. The IRR is the discount rate that makes the NPV greater than zero.
b. The IRR is a discounted cash flow method.
c. The IRR is an expected rate of return.
d. None of these.
b - ANSWER QN=222 (20474) To accept a capital project when using NPV,
a. (i) the project NPV should be less than zero.
b. (ii) the project NPV should be greater than zero.
c. both (i) and (ii).
d. none of these.
c - ANSWER QN=223 (20475) Which ONE of the following statements about the
payback method is true?
a. The payback method is consistent with the goal of shareholder wealth maximization
b. The payback method represents the number of years it takes a project to recover its
initial investment plus a required rate of return.
c. There is no economic rational that links the payback method to shareholder wealth
maximization.
b - ANSWER QN=212 (20470) Which one of the following statements is NOT true?
a. Accepting a positive-NPV project increases shareholder wealth.
b. Accepting a negative-NPV project has no impact on shareholder wealth.
c. Accepting a negative-NPV project decreases shareholder wealth.
d. Managers are indifferent about accepting or rejecting a zero NPV project.
b - ANSWER QN=213 (20462) Which of the following are aspects of independent
projects?
a. Their cash flows are related.
b. Their cash flows are unrelated.
c. Selecting one would automatically eliminate accepting the other.
d. None of these.
c - ANSWER QN=214 (20463) Two projects are considered to be independent if
a. (i) selecting one would have no bearing on accepting the other.
b. (ii) their cash flows are unrelated.
c. Both (i) and (ii).
d. None of these.
c - ANSWER QN=215 (20477) Advantages of the payback method include the
following.
a. (i) The technique is simple for managers to compute and interpret.
b. (ii) It is a good measure of liquidity risk.
c. Both (i) and (ii).
d. None of these.
c - ANSWER QN=216 (20483) Which one of the following cash flow patterns is NOT an
unconventional cash flow pattern?
a. A positive initial cash flow is followed by negative future cash flows.
b. Future cash flows from a project could include both positive and negative cash flows.
c. A negative initial cash flow is followed by positive future cash flows.
d. A cash flow stream looks similar to a conventional cash flow stream except for a final
negative cash flow.
, d - ANSWER QN=217 (20473) The net present value
a. uses the discounted cash flow valuation technique.
b. will provide a direct measure of how much the firm value will change because of the
capital project.
c. is consistent with shareholder wealth maximization goal.
d. all of these.
c - ANSWER QN=218 (20466) Contingent projects would imply that
a. (i) the acceptance of one project is dependent on the acceptance of the other.
b. (ii) the projects can be either mandatory or optional.
c. Both (i) and (ii).
d. None of these.
b - ANSWER QN=219 (20469) Capital rationing implies that
a. funding resources exceed funding needs.
b. funding needs exceed funding resources.
c. funding needs equal funding resources.
d. none of these.
b - ANSWER QN=220 (20480) The internal rate of return is
a. (i) the discount rate that makes the NPV greater than zero.
b. (ii) the discount rate that makes the NPV equal to zero.
c. (iii) the discount rate that makes the NPV less than zero.
d. both (i) and (iii).
a - ANSWER QN=221 (20479) Which one of the following statements about IRR is NOT
true?
a. The IRR is the discount rate that makes the NPV greater than zero.
b. The IRR is a discounted cash flow method.
c. The IRR is an expected rate of return.
d. None of these.
b - ANSWER QN=222 (20474) To accept a capital project when using NPV,
a. (i) the project NPV should be less than zero.
b. (ii) the project NPV should be greater than zero.
c. both (i) and (ii).
d. none of these.
c - ANSWER QN=223 (20475) Which ONE of the following statements about the
payback method is true?
a. The payback method is consistent with the goal of shareholder wealth maximization
b. The payback method represents the number of years it takes a project to recover its
initial investment plus a required rate of return.
c. There is no economic rational that links the payback method to shareholder wealth
maximization.
