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Chapter05-NetPresentValueandOtherInvestmentRules5-11.Thedifferencebetweenthepresentvalueofaninvestmentanditscostisthe:A.netpresentvalue.B.internalrateofreturn.C.paybackperiod.D.profitabilityindex.E.discountedpaybackperiod.2.Whichoneofthefollowingstatementsconcerningnetpresentvalue(NPV)iscorrect?A.Aninvestmentshouldbeacceptedif,andonlyif,theNPVisexactlyequaltozero.B.AninvestmentshouldbeacceptedonlyiftheNPVisequaltotheinitialcashflow.C.AninvestmentshouldbeacceptediftheNPVispositiveandrejectedifitisnegative.D.Aninvestmentwithgreatercashinflowsthancashoutflows,regardlessofwhenthecashflowsoccur,willalwayshaveapositiveNPVandthereforeshouldalwaysbeaccepted.E.Anyprojectthathaspositivecashflowsforeverytimeperiodaftertheinitialinvestmentshouldbeaccepted.3.Thelengthoftimerequiredforaninvestmenttogeneratecashflowssufficienttorecovertheinitialcostoftheinvestmentiscalledthe:A.netpresentvalue.B.internalrateofreturn.C.paybackperiod.D.profitabilityindex.E.discountedcashperiod4.Whichoneofthefollowingstatementsiscorrectconcerningthepaybackperiod?A.Aninvestmentisacceptableifitscalculatedpaybackperiodislessthansomepre-specifiedperiodoftime.B.Aninvestmentshouldbeacceptedifthepaybackispositiveandrejectedifitisnegative.C.Aninvestmentshouldberejectedifthepaybackispositiveandacceptedifitisnegative.D.Aninvestmentisacceptableifitscalculatedpaybackperiodisgreaterthansomepre-specifiedperiodoftime.E.Aninvestmentshouldbeacceptedanytimethepaybackperiodislessthanthediscountedpaybackperiod,givenapositivediscountrate.5.Thelengthoftimerequiredforaproject'sdiscountedcashflowstoequaltheinitialcostoftheprojectiscalledthe:A.netpresentvalue.B.internalrateofreturn.C.paybackperiod.D.discountedprofitabilityindex.E.discountedpaybackperiod.6.Thediscountedpaybackrulestatesthatyoushouldacceptprojects:A.whichhaveadiscountedpaybackperiodthatisgreaterthansomepre-specifiedperiodoftime.B.ifthediscountedpaybackispositiveandrejectedifitisnegative.C.onlyifthediscountedpaybackperiodequalssomepre-specifiedperiodoftime.D.ifthediscountedpaybackperiodislessthansomepre-specifiedperiodoftime.E.onlyifthediscountedpaybackperiodisequaltozero.7.Thediscountratethatmakesthenetpresentvalueofaninvestmentexactlyequaltozeroiscalledthe:A.externalrateofreturn.B.internalrateofreturn.C.averageaccountingreturn.D.profitabilityindex.E.Equalizer.8.AninvestmentisacceptableifitsIRR:A.isexactlyequaltoitsnetpresentvalue(NPV).B.isexactlyequaltozero.C.islessthantherequiredreturn.D.exceedstherequiredreturn.E.isexactlyequalto100%9.ThepossibilitythatmorethanonediscountratewillmaketheNPVofaninvestmentequaltozeroiscalledthe_____problem.A.netpresentvalueprofilingB.operationalambiguityC.mutuallyexclusiveinvestmentdecisionD.issuesofscaleE.multipleratesofreturn10.Asituationinwhichacceptingoneinvestmentpreventstheacceptanceofanotherinvestmentiscalledthe:A.netpresentvalueprofile.B.operationalambiguitydecision.C.mutuallyexclusiveinvestmentdecision.D.issuesofscaleproblem.E.multiplechoicesofoperationsdecision.11.Thepresentvalueofaninvestment'sfuturecashflowsdividedbytheinitialcostoftheinvestmentiscalledthe:A.netpresentvalue.B.internalrateofreturn.C.averageaccountingreturn.D.profitabilityindex.E.profileperiod.Chapter05-NetPresentValueandOtherInvestmentRules5-212.Aninvestmentisacceptableiftheprofitabilityindex(PI)oftheinvestmentis:A.greaterthanone.B.lessthanone.C.greaterthantheinternalrateofreturn(IRR).D.lessthanthenetpresentvalue(NPV).E.greaterthanapre-specifiedrateofreturn.13.Allelseconstant,thenetpresentvalueofatypicalinvestmentprojectincreaseswhen:A.thediscountrateincreases.B.eachcashinflowisdelayedbyoneyear.C.theinitialcostofaprojectincreases.D.therateofreturndecreases.E.allcashinflowsoccurduringthelastyearofaproject'slifeinsteadofperiodicallythroughoutthelifeoftheproject.14.Theprimaryreasonthatcompanyprojectswithpositivenetpresentvaluesareconsideredacceptableisthat:A.theycreatevaluefortheownersofthefirm.B.theproject'srateofreturnexceedstherateofinflation.C.theyreturntheinitialcashoutlaywithinthreeyearsorless.D.therequiredcashinflowsexceedtheactualcashinflows.E.theinvestment'scostexceedsthepresentvalueofthecashinflows.15.Ifaprojecthasanetpresentvalueequaltozero,then:I.thepresentvalueofthecashinflowsexceedstheinitialcostoftheproject.II.theprojectproducesarateofreturnthatjustequalstheraterequiredtoaccepttheproject.III.theprojectisexpectedtoproduceonlytheminimallyrequiredcashinflows.IV.anydelayinreceivingtheprojectedcashinflowswillcausetheprojecttohaveanegativenetpresentvalue.A.IIandIIIonlyB.IIandIVonlyC.I,II,andIVonlyD.II,III,andIVonlyE.I,II,andIIIonly16.Netpresentvalue:A.cannotbeusedwhendecidingbetweentwomutuallyexclusiveprojects.B.ismoreusefultodecisionmakersthantheinternalrateofreturnwhencomparingdifferentsizedprojects.C.iseasytoexplaintonon-financialmanagersandthusistheprimarymethodofanalysisusedbythelowestlevelsofmanagement.D.isnotanaswidelyusedtoolaspaybackanddiscountedpayback.E.isverysimilarinitsmethodologytotheaverageaccountingreturn.17.Paybackisfrequentlyusedtoanalyzeindependentprojectsbecause:A.i