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10 Cards in this Set
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Which one of the following methods of project analysis is defined as computing the value of a project based upon the present value of the project's anticipated cash flows?
constant dividend growth model discounted cash flow valuation average accounting return expected earnings model internal rate of return 
discounted cash flow valuation


The length of time a firm must wait to recoup the money it has invested in a project is called the:
internal return period. payback period. profitability period. discounted cash period. valuation period. 
payback period.


The length of time a firm must wait to recoup, in present value terms, the money it has in invested in a project is referred to as the:
net present value period. internal return period. payback period. discounted profitability period. discounted payback period. 
discounted payback period.


The internal rate of return is defined as the:
maximum rate of return a firm expects to earn on a project. rate of return a project will generate if the project in financed solely with internal funds. discount rate that equates the net cash inflows of a project to zero. discount rate which causes the net present value of a project to equal zero. discount rate that causes the profitability index for a project to equal zero. 
discount rate which causes the net present value of a project to equal zero.


You are viewing a graph that plots the NPVs of a project to various discount rates that could be applied to the project's cash flows. What is the name given to this graph?
project tract projected risk profile NPV profile NPV route present value sequence 
NPV profile


If a firm accepts Project A it will not be feasible to also accept Project B because both projects would require the simultaneous and exclusive use of the same piece of machinery. These projects are considered to be:
independent. interdependent. mutually exclusive. economically scaled. operationally distinct. 
mutually exclusive.


The present value of an investment's future cash flows divided by the initial cost of the investment is called the:
net present value. internal rate of return. average accounting return. profitability index. profile period. 
profitability index.


A project has a net present value of zero. Which one of the following best describes this project?
The project has a zero percent rate of return. The project requires no initial cash investment. The project has no cash flows. The summation of all of the project's cash flows is zero. The project's cash inflows equal its cash outflows in current dollar terms. 
The project's cash inflows equal its cash outflows in current dollar terms.


Which one of the following will decrease the net present value of a project?
increasing the value of each of the project's discounted cash inflows moving each of the cash inflows to an earlier time period decreasing the required discount rate increasing the project's initial cost at time zero increasing the amount of the final cash inflow 
increasing the project's initial cost at time zero


Net present value:
is the best method of analyzing mutually exclusive projects. is less useful than the internal rate of return when comparing different sized projects. is the easiest method of evaluation for nonfinancial managers to use. is less useful than the profitability index when comparing mutually exclusive projects. is very similar in its methodology to the average accounting return. 
is the best method of analyzing mutually exclusive projects.
