Question 1
1 pts
A real estate investment is available at an initial cash outlay of $10,000 and is expected to yield cash flows of $3,343.81 per year for 5 years. The internal rate of return is approximately:
2%
20%
23%
17%
Question 2
1 pts
Two mutually exclusive projects are available for an investment of $4,900 each. Project S will generate cash flows of $6,000 per year for two years. Project L will generate cash flows of $2,400 per year for six years. At an opportunity cost of capital of 6%, which project will yield the highest net present value?
Project S npv 16297.81 pi 3.10
Project L npv 9301.58 pi 2.41
The Net Present Values are Equal
Cannot be solved with the information provided.
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Question 3
1 pts
The net present value is equal to:
the present value of expected cash flows, plus the initial cash outlay.
the present value of expected cash flows, less the initial cash outlay.
a and c above.
b and c above.
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Question 4
1 pts
An investment will be considered further when:
The present value is greater than the initial cash outlay.
the net present value is greater than zero.
the internal rate of return is greater than the desired rate of return
all of the above
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Question 5
1 pts
The internal rate of return:
The internal rate of return:
A) assumes that future cash flows will be reinvested at the internal rate of return.
B) May yield an investment decision in conflict with that provided by the net present value method.
C) yields consistent results when both positive and negative cash flows are present in an income stream.
D) a and b above.
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Question 6
1 pts
Present value (not Net Present Value...consider this carefully before answering):
in excess of zero means a project is expected to yield a rate of return in excess of the discount rate employed.
is the value now of all net benefits that are expected to accrue in the future.
will always equal zero when the discount rate is the internal rate of return.
will always equal a project's purchase price when the discount rate is the internal rate of return.
q
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Question 7
1 pts
The internal rate of return:
The internal rate of return:
will always exceed the discount rate employed to calculate the net present value.
will exceed the discount rate used to calculate net present value only when the net present value is less than zero.
will exceed the discount rate used to calculate net present value only when the net present value is equal to zero.
will exceed the discount rate used to calculate net present value only when the net present value is greater than zero.
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Question 8
1 pts
Investment decision criteria generated with the internal rate of return approach:
are always unambiguous.
never conflict with criteria generated with the net present value approach.
are of limited reliability when comparing investments with different holding period.
are generally more reliable than those generated with the net present value approach.
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Question 9
1 pts
Discrepancies between decision signals generated by the internal rate of return and the net present value approaches can result from all the following EXCEPT:
projects differ in size.
the timing of cash flows differ.
The reinvestment rate s substantially below the internal rate of return.
projects have perpetual cash flows.
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Question 10
1 pts
The internal rate of return equation incorporates:
future cash outflows and inflows, but not initial cash flows.
future cash outflows and inflows, and initial cash outflow, but not initial cash inflows.
initial cash outflow and invlow, and future cash inflows, but not future cash outflows.
initial cash outflow and inflow, and future cash outflow and inflow.