FIN 6100 Module 4 Exam Questions and Answers Already Passed Latest Update

FIN 6100 Module 4 Exam Questions and Answers Already Passed Latest Update Side Effects - Answers Which of the following items would you find in the operating cash flow? a) Side Effects b) Net salvage value of assets c) Opportunity Costs d) WACC Internal rate of return - Answers Which decision rule compares the rate of return earned on your investment to the weighted average cost of capital when deciding whether you want to accept a project? a) Net present value b) Internal rate of return c) Profitability index d) Payback period False - Answers The net income shown on the income statement is the same as the operating cash flow True/False B. II and III only - Answers The internal rate of return (IRR): (I) rule states that a typical investment project with an IRR that is less than the required rate should be accepted. (II) is the rate generated solely by the cash flows of an investment. (III) is the rate that causes the net present value of a project to exactly equal zero. (IV) can effectively be used to analyze all investment scenarios. A. I and IV only B. II and III only C. I, II, and III only D. II, III, and IV only E. I, II, III, and IV C. You should accept both projects since both of their PIs are greater than 1. - Answers You are considering two independent projects both of which have been assigned a discount rate of 8% . Based on the profitability index, what is your recommendation concerning these projects? Project A Year Cash Flow 0 -$38,500 1 $20,000 2 $24,000 Project B Year Cash Flow 0 -$42,000 1 $10,000 2 $40,000 A. You should accept both projects since both of their PIs are positive. B. You should accept project A since it has the higher PI. C. You should accept both projects since both of their PIs are greater than 1. D. You should only accept project B since it has the largest PI and the PI exceeds 1. E. Neither project is acceptable. F. You should accept both projects if the funds are available to do so since both NPV's are 0. - Answers You are considering two independent projects with the following cash flows. The required return for both projects is 10%. Given this information, which one of the following statements is correct? Project A 0 -950,000 1 330,000 2 400,000 3 450,000 Project B 0 -125,000 1 55,000 2 50,000 3 50,000 A. You should accept project B since it has the higher IRR and reject project A because B. you can not accept both projects. C. You should accept project A because it has the lower NPV and reject project B. D. You should accept project A because it has the higher NPV and you can not accept both projects. E. You should accept project B because it has the higher IRR and reject project A. F. You should accept both projects if the funds are available to do so since