FNAN 522 Chapter 9 (exam
1) with complete verified
solutions 2025
The internal rate of return is defined as the:
A. maximum rate of return a firm expects to earn on a project.
B. rate of return a project will generate if the project in financed
solely with internal funds.
C. discount rate that equates the net cash inflows of a project to
zero.
D. discount rate which causes the net present value of a project to
equal zero.
E. discount rate that causes the profitability index for a project to
equal zero. - answer D. discount rate which causes the net present
value of a project to equal zero.
A project's average net income divided by its average book value is
referred to as the project's average:
A. net present value.
B. internal rate of return.
C. accounting return.
D. profitability index.
E. payback period - answer C. accounting return.
A project has a net present value of zero. Which one of the following
best describes this project?
A. The project has a zero percent rate of return.
B. The project requires no initial cash investment.
C. The project has no cash flows.
, D. The summation of all of the project's cash flows is zero.
E. The project's cash inflows equal its cash outflows in current dollar
terms. - answer E. The project's cash inflows equal its cash outflows
in current dollar terms.
Samuelson Electronics has a required payback period of three years
for all of its projects. Currently, the
firm is analyzing two independent projects. Project A has an
expected payback period of 2.8 years and a net
present value of $6,800. Project B has an expected payback period
of 3.1 years with a net present value of
$28,400. Which projects should be accepted based on the payback
decision rule?
A. Project A only
B. Project B only
C. Both A and B
D. Neither A nor B
E. Answer cannot be determined based on the information given. -
answer A. Project A only
Douglass Interiors is considering two mutually exclusive projects
and have determined that the crossover
rate for these projects is 11.7 percent. Project A has an internal rate
of return (IRR) of 15.3 percent and
Project B has an IRR of 16.5 percent. Given this information, which
one of the following statements is
correct?
A. Project A should be accepted as its IRR is closer to the crossover
point than is Project B's IRR.
B. Project B should be accepted as it has the higher IRR.
C. Both projects should be accepted as both of the project's IRRs
exceed the crossover rate.
1) with complete verified
solutions 2025
The internal rate of return is defined as the:
A. maximum rate of return a firm expects to earn on a project.
B. rate of return a project will generate if the project in financed
solely with internal funds.
C. discount rate that equates the net cash inflows of a project to
zero.
D. discount rate which causes the net present value of a project to
equal zero.
E. discount rate that causes the profitability index for a project to
equal zero. - answer D. discount rate which causes the net present
value of a project to equal zero.
A project's average net income divided by its average book value is
referred to as the project's average:
A. net present value.
B. internal rate of return.
C. accounting return.
D. profitability index.
E. payback period - answer C. accounting return.
A project has a net present value of zero. Which one of the following
best describes this project?
A. The project has a zero percent rate of return.
B. The project requires no initial cash investment.
C. The project has no cash flows.
, D. The summation of all of the project's cash flows is zero.
E. The project's cash inflows equal its cash outflows in current dollar
terms. - answer E. The project's cash inflows equal its cash outflows
in current dollar terms.
Samuelson Electronics has a required payback period of three years
for all of its projects. Currently, the
firm is analyzing two independent projects. Project A has an
expected payback period of 2.8 years and a net
present value of $6,800. Project B has an expected payback period
of 3.1 years with a net present value of
$28,400. Which projects should be accepted based on the payback
decision rule?
A. Project A only
B. Project B only
C. Both A and B
D. Neither A nor B
E. Answer cannot be determined based on the information given. -
answer A. Project A only
Douglass Interiors is considering two mutually exclusive projects
and have determined that the crossover
rate for these projects is 11.7 percent. Project A has an internal rate
of return (IRR) of 15.3 percent and
Project B has an IRR of 16.5 percent. Given this information, which
one of the following statements is
correct?
A. Project A should be accepted as its IRR is closer to the crossover
point than is Project B's IRR.
B. Project B should be accepted as it has the higher IRR.
C. Both projects should be accepted as both of the project's IRRs
exceed the crossover rate.
