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problem1. Which one of the following is project acceptance indicator given independent project with investing type cash flows?

A. Profitability index less than 1.0

B. Project's internal rate of return less than required return

C. Discounted payback period greater than requirement

D. Average accounting return that is less than the internal rate of return

E. Modified internal rate of return which exceeds the required return

problem2. When a firm accepts Project A it will not be possible to also accept Project B because both projects would need the simultaneous and exclusive use of same piece of machinery. These projects are considered to be:

A. Independent

B. Interdependent

C. Mutually exclusive

D. Economically scaled

E. Operationally distinct

problem3. A project has required payback period of 3 years. Which one of the following statements is right concerning the payback analysis of this project?

A. The cash flows in each of the 3 years should exceed one-third of the project's initial cost if the project is to be accepted.

B. The cash flow in year 3 is ignored.

C. The project's cash flow in year 3 is discounted by a factor of (1 + R) 3.

D. The cash flow in year two is valued just as highly as the cash flow in year 1.

E. The project is acceptable if the payback period exceeds 3years.

problem4. Southern Chicken is considering 2 projects. Project A comprises creating an outdoor eating area on the unused portion of restaurant's property. Project B would employ that outdoor space for creating a drive-thru service window. When trying to decide which project to accept, the firm must rely most heavily on which one of the following analytical methods?

A. Profitability index

B. Internal rate of return

C. Payback

D. Net present value

E. Accounting rate of return

problem5. Kristi desires to start training her most junior assistant, Amy, in art of project analysis. Amy has just started college and has no background or experience in business finance. To get her started, Kristi is going to consign the responsibility for all projects that have initial costs less than $1,000 to Amy to analyze. Which technique is Kristi most apt to ask Amy to use in making her initial decisions?

A. Discounted payback

B. Profitability index

C. Internal rate of return

D. Payback

E. Average accounting return

Financial Accounting, Accounting

  • Category:- Financial Accounting
  • Reference No.:- M93978

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