WGU D076 Unit 6 Question and
answers already passed 2025/2026
Net Present Value (NPV) - correct answer ✔the sum (or net) of the present values of all of the project's
expected cash inflows and outflows.
Advantages of NPV - correct answer ✔Considers time value of money
Calculates value added to the firm
Considers risk and required return
Disadvantages of NPV - correct answer ✔Requires calculation of appropriate cost of capital
Is not useful to compare projects of varying sizes
Internal Rate of Return (IRR) - correct answer ✔The rate of return that a firm earns on its capital
projects.
Hurdle Rate - correct answer ✔The required rate of return that a company expects to earn in order to
consider a project.
Advantages of IRR - correct answer ✔is easy to interpret,
considers time value of money, and
does not require use of required rate of return.
Disadvantages of IRR - correct answer ✔is not a good indicator of the amount of value created,
ignores mutually exclusive projects,
assumes reinvestment at the IRR rate,
, cannot be used to compare projects with different durations, and
requires conventional cash flows.
Capital Constrained Environment - correct answer ✔When a limited amount of funds are available.
Mutually Exclusive - correct answer ✔When two or more events do not coincide.
Profitability Index (PI) - correct answer ✔The ratio of payoff to investment for a proposed project.
Advantages of PI - correct answer ✔Considers the time value of money
Takes into account the risk of future cash flows through the cost of capital
Includes all future cash flows
Indicates whether an investment will create value for the company
Disadvantages of PI - correct answer ✔requires calculation of cost of capital and
is not useful for mutually exclusive projects.
Fixed Income Securities - correct answer ✔Another name for bonds; a financial security in which the
borrower pays a fixed interest payment to investors each year.
Coupon Rate - correct answer ✔The stated interest rate of a bond; also known as coupon yield.
Par Value - correct answer ✔The sum of money that a corporation promises to pay at the expiration of
a bond; also called face value.
Maturity Date - correct answer ✔The date at which a bond expires.
answers already passed 2025/2026
Net Present Value (NPV) - correct answer ✔the sum (or net) of the present values of all of the project's
expected cash inflows and outflows.
Advantages of NPV - correct answer ✔Considers time value of money
Calculates value added to the firm
Considers risk and required return
Disadvantages of NPV - correct answer ✔Requires calculation of appropriate cost of capital
Is not useful to compare projects of varying sizes
Internal Rate of Return (IRR) - correct answer ✔The rate of return that a firm earns on its capital
projects.
Hurdle Rate - correct answer ✔The required rate of return that a company expects to earn in order to
consider a project.
Advantages of IRR - correct answer ✔is easy to interpret,
considers time value of money, and
does not require use of required rate of return.
Disadvantages of IRR - correct answer ✔is not a good indicator of the amount of value created,
ignores mutually exclusive projects,
assumes reinvestment at the IRR rate,
, cannot be used to compare projects with different durations, and
requires conventional cash flows.
Capital Constrained Environment - correct answer ✔When a limited amount of funds are available.
Mutually Exclusive - correct answer ✔When two or more events do not coincide.
Profitability Index (PI) - correct answer ✔The ratio of payoff to investment for a proposed project.
Advantages of PI - correct answer ✔Considers the time value of money
Takes into account the risk of future cash flows through the cost of capital
Includes all future cash flows
Indicates whether an investment will create value for the company
Disadvantages of PI - correct answer ✔requires calculation of cost of capital and
is not useful for mutually exclusive projects.
Fixed Income Securities - correct answer ✔Another name for bonds; a financial security in which the
borrower pays a fixed interest payment to investors each year.
Coupon Rate - correct answer ✔The stated interest rate of a bond; also known as coupon yield.
Par Value - correct answer ✔The sum of money that a corporation promises to pay at the expiration of
a bond; also called face value.
Maturity Date - correct answer ✔The date at which a bond expires.
