第9章习题

Chapter 09 Quiz A Student Name _________________________ Student ID ____________Use the following information to answer questions 1 through 4.You are analyzing a proposed project and have compiled the following information:Year Cash flow0 -$135,0001 $ 28,6002 $ 65,5003 $ 71,900Required payback period 3 yearsRequired return 8.50 percent________ 1. What is the net present value of the proposed project?a. $3,289.86b. $3,313.29c. $4,289.06d. $4,713.71________ 2. What is the discounted payback period?a. 2.57 yearsb. 2.64 yearsc. 2.87 yearsd. 2.94 years________ 3. Should the project be accepted based on the internal rate of return (IRR)? Why or why not?a. yes; The project IRR is greater than the required return.b. yes; The project IRR is equal to zero.c. no; The project IRR is greater than the required return.d. no; The project IRR is greater than zero.________ 4. Should the proposed project be accepted based on the profitability index (PI)? Why or why not?a. yes; The PI is less than 1.0.b. yes; The PI is greater than 1.0.c. no; The PI is less than 1.0.d. no; The PI is greater than 1.0.________ 5. Winslow, Inc. is considering opening a new plant to produce snow skis. The initial cost of the project is $1.8 million. This cost will be depreciated straight-line to a zero book value over the 10-year life of the project.The net income of the project is expected to be a loss of $250,000 a year for the first four years. The netincome is projected at $50,000, $230,000, $390,000, $480,000, $750,000, and $800,000 for years 5 through10, respectively. What is the average accounting return on this project?a. 3.15 percentb. 9.44 percentc. 15.77 percentd. 18.89 percent________ 6. You are evaluating projects that are independent and have conventional cash flows. Rank each of the following analysis methods in order of preference from a financial viewpoint in relation to these projects. Listthe most valuable method first.I. internal rate of returnII. paybackIII average accounting returnIV. net present valuea. IV, II, III, Ib. II, IV, III, Ic. IV, I, II, IIId. III, IV, I, II________ 7. Which of the following statements are correct concerning the internal rate of return (IRR)?I. IRR is used to determine which one of two mutually exclusive projects should be accepted.II. IRR is the discount rate that makes the net present value equal to zero.III. There can be multiple IRRs if the cash flows are unconventional.IV. You should accept a project when the IRR is less than the required return.a. I and III onlyb. II and IV onlyc. II and III onlyd. I and II only________ 8. You should accept a project when the:a. net present value is negative.b. profitability index is positive.c. payback period exceeds the required period.d. AAR is greater than the required return.________ 9. The point where the net present values of two projects are equal is referred to as the:a. internal rate of return.b. crossover point.c. point of profitability.d. payback point of equivalency.________ 10. Which one of the following statements is correct?a. The payback period is also referred to as the benefit-cost ratio.b. The internal rate of return can be reliably used for all independent projects.c. The profitability index is used when the investment funds are limited.d. The net present value should not be used to rank mutually exclusive projects.Chapter 09 Quiz AAnswers1. a321)085.1(900,71$)085.1(500,65$)085.1(600,28$000,135$NPV ++++++-=; NPV = $3,289.86CF 0 -$135,000 C01 $28,600 F01 1 C02 $65,500 F02 1 C03 $71,900 F03 1 I = 8.5 NPV CPT $3,289.862. dYear Cash flow Discounted cash flow1 $28,600 $26,359.452 $65,500 $55,639.323 $71,900 $56,291.0909.291,56$32.639,55$45.359,26$000,135$2payback Discounted --+= = 2.94 years3. aCF 0 -$135,000 C01 $28,600 F01 1 C02 $65,500 F02 1 C03 $71,900 F03 1 I = 8.5 IRR CPT 9.69 percentThe project should be accepted because the IRR of 9.69 percent is greater than the required return of 8.5percent.4. bCF 0 $0 C01 $28,600 F01 1 C02 $65,500 F02 1 C03 $71,900 F03 1 I = 8.5 NPV CPT $138,289.86 02.1000,135$86.289,138$PI == The project should be accepted because the PI of 1.02 is greater than 1.0.5. dpercent 89.181889.2$000,800,1$10000,800$000,750$000,480$000,390$000,230$000,50$)4000,250$(AAR ==+++++++⨯-=6.c Net present value is the most valuable and the average accounting return is the least valuable. The IRR is better than payback from a financial viewpoint since IRR considers the time value of money. Also, it is important to note that the projects have conventional cash flows and are independent. 7.c 8.d 9.b 10.cChapter 09 Quiz B Student Name _________________________ Student ID ____________Use the following information to answer questions 1 through 4.You are analyzing a proposed project and have compiled the following information:Year Cash flow0 -$120,0001 $ 14,9002 $ 86,2003 $ 41,500Required payback period 3 yearsRequired return 10 percent________ 1. What is the net present value of the proposed project?a. -$5,122.30b. -$4,035.31c. $2,162.91d. $3,908.02________ 2. What is the discounted payback period?a. 2.46 yearsb. 2.67 yearsc. 2.97 yearsd. never________ 3. Should the project be accepted based on the internal rate of return (IRR)? Why or why not?a. yes; The project IRR is less than the required return.b. yes; The project IRR is equal to zero.c. no; The project IRR is less than the required return.d. no; The project IRR is greater than zero.________ 4. Should the proposed project be accepted based on the profitability index (PI)? Why or why not?a. yes; The PI is less than 1.0.b. yes; The PI is greater than 1.0.c. no; The PI is less than 1.0.d. no; The PI is greater than 1.0.________ 5. Winslow, Inc. is considering opening a new plant to produce snow skis. The initial cost of the project is $2.4 million. This cost will be depreciated straight-line to a zero book value over the 10-year life of the project.The net income of the project is expected to be a loss of $280,000 a year for the first three years. The netincome is projected at $70,000, $125,000, $320,000, $410,000, $460,000, $720,000, and $790,000 for years 5through 10, respectively. What is the average accounting return on this project?a. 1.71 percentb. 8.56 percentc. 9.81 percentd. 17.13 percent________ 6. You are evaluating projects that are independent and have conventional cash flows. Rank each of the following analysis methods in order of preference from a financial viewpoint in relation to these projects. Listthe most valuable method first.I. accounting rate of returnII. paybackIII profitability indexIV. net present valuea. IV, II, III, Ib. II, IV, III, Ic. IV, III, II, Id. III, IV, I, II________ 7. Which of the following statements are correct concerning the profitability index (PI)?I. PI should not be used to determine which one of two mutually exclusive projects should beaccepted.II. PI is the discount rate that makes the net present value equal to zero.III. There can be multiple PIs if the cash flows are unconventional.IV. PI is used to rank positive NPV projects when the available funds are limited.a. I and III onlyb. II and IV onlyc. II and III onlyd. I and IV only________ 8. You should accept a project when the:a. net present value is negative.b. profitability index is less than 1 but greater than 0.c. discounted payback period is less than the required period.d. AAR is less than the required return.________ 9. The crossover point:a. is used to determine which one of two internal rates of return for a project should be used whendetermining if a project should be accepted.b. is the point where the net present value of a project is equal to 0.c. equates the net present values of two separate projects.d. is the point in time when a project pays back on a discounted basis.________ 10. Which one of the following statements is correct?a. The payback period of a project will be longer than the discounted payback period.b. The internal rate of return can be reliably used for all independent projects.c. The internal rate of return is used to evaluate different sized projects.d. The internal rate of return should not be used to rank mutually exclusive projects.。