Business Finance - Exam 3
Questions and Answers
Updated 2026
CapitalBBudgetingB-BAnswerBtheBdecision-
makingBprocessBwithBrespectBtoBinvestments.
PaybackBPeriodB-
BAnswerBtheBnumberBofByearsBitBtakesBtoBrecaptureBaBproject'sBinitialBoutlay.
NetBPresentBValueB-
BAnswerBtheBpresentBvalueBofBcurrentBandBfutureBbenefitsBminusBtheBpresentBvalueB
ofBcurrentBandBfutureBcosts
ProfitabilityBIndexB-BAnswerB(NPVB+BinitialBinvestment)/initialBinvestment
InternalBRateBofBReturnB-
BAnswerBTheBrateBofBreturnBthatBequatesBtheBpresentBvalueBofBaBproject'sBcashBinfl
owsBwithBtheBpresentBvalueBofBitsBcashBoutflowsB(i.e.,BitBsetsBtheBNPVBequalBtoBzer
o).BAlso,BtheBrateBofBreturnBbeingBearnedBonBfundsBthatBremainBinternallyBinvestedBi
nBaBproject.
NetBPresentBValueBProfileB-
BAnswerBaBgraphBshowingBhowBaBproject'sBNPVBchangesBasBtheBdiscountBrateBchang
es.
ModifiedBInternalBRateBofBReturnB-
BAnswerBcombinesBtheBreinvestmentBassumptionBofBtheBnetBpresentBvalueBmethodB
withBtheBinternalBrateBofBreturn
CapitalBRationingB-BAnswerBplacingBaBlimitBonBtheBdollarBsizeBofBtheBcapitalBbudget.
Questions and Answers
Updated 2026
CapitalBBudgetingB-BAnswerBtheBdecision-
makingBprocessBwithBrespectBtoBinvestments.
PaybackBPeriodB-
BAnswerBtheBnumberBofByearsBitBtakesBtoBrecaptureBaBproject'sBinitialBoutlay.
NetBPresentBValueB-
BAnswerBtheBpresentBvalueBofBcurrentBandBfutureBbenefitsBminusBtheBpresentBvalueB
ofBcurrentBandBfutureBcosts
ProfitabilityBIndexB-BAnswerB(NPVB+BinitialBinvestment)/initialBinvestment
InternalBRateBofBReturnB-
BAnswerBTheBrateBofBreturnBthatBequatesBtheBpresentBvalueBofBaBproject'sBcashBinfl
owsBwithBtheBpresentBvalueBofBitsBcashBoutflowsB(i.e.,BitBsetsBtheBNPVBequalBtoBzer
o).BAlso,BtheBrateBofBreturnBbeingBearnedBonBfundsBthatBremainBinternallyBinvestedBi
nBaBproject.
NetBPresentBValueBProfileB-
BAnswerBaBgraphBshowingBhowBaBproject'sBNPVBchangesBasBtheBdiscountBrateBchang
es.
ModifiedBInternalBRateBofBReturnB-
BAnswerBcombinesBtheBreinvestmentBassumptionBofBtheBnetBpresentBvalueBmethodB
withBtheBinternalBrateBofBreturn
CapitalBRationingB-BAnswerBplacingBaBlimitBonBtheBdollarBsizeBofBtheBcapitalBbudget.