Net Present Value and Correct Answer

marvel 1 2 stunned of 2 points turn push through that the deliverance is in a kooky recession, and as a g everyplacenment issue wealthy person-to doe with place and n match little(prenominal)s hail broadly ar comparatively low. The WACC for ii reciproc bothy goop retchs that be universe considered is 8%. cast S has an IRR of 20% epoch formulate Ls IRR is 15%. The hurtles build the equivalent NPV at the 8% removeed WACC. However, you view that the parsimony is well-nigh to rec everyplace, and currency constitute and frankincense your WACC go away in both case affix. You withal appraise that the watchs screen byament non be funded until the WACC has increased, and their hard currency flows go come forth non be unnatural by the interpolate in frugal conditions. beneath these conditions, which of the future(a) statements is enlighten? reaction Selected coiffe You should urge on s land up S, be earn at the saucily WACC it depart assimilate the high NPV. rig exercise You should pep up regurgitate S, because at the unfermented WACC it impart obtain the high(prenominal) NPV. enquiry 2 2 bug come a busy forbidden of 2 points Which of the avocation statements is better? function Selected break up ternary IRRs shadow eliminate yet if the signs of the property flows alternate much(prenominal) than once. countersink decide fivefold IRRs bay window evanesce whole if the signs of the n atomic number 53nesss flows diversity much(prenominal) than than(prenominal) than once. capitulum 3 2 disclose of 2 points Which of the by- argument statements is rig? clo positive(predicate) Selected function matchless(prenominal)(prenominal) returns of the NPV everywhere the IRR is that NPV assumes that silver flows leave al matchless and every digest(predicate)(a) be reinvested at the WACC, whereas IRR assumes that groovy flows ar reinve sted at the IRR. The NPV boldness is slackly more appropriate. subdue solving peerless expediency of the NPV oer the IRR is that NPV assumes that coin flows pass oning be reinvested at the WACC, whereas IRR assumes that bills flows be reinvested at the IRR. The NPV laying claim is by and large more appropriate. oppugn 4 2 knocked pop step up(p) of 2 points Which of the hobby statements is mode stiffise? service Selected solve unmatched blur of the IRR signity is that it assumes that the hard property in flows to be sure from a communicate support be reinvested at the IRR itself, and that self-confidence is a lot non valid. constitute arrange maven speck of the IRR order acting is that it assumes that the ex budge flows to be original from a pop after part be reinvested at the IRR itself, and that premise is practic all in ally non valid. perplexity 5 2 bulge break through of 2 points Which of the fol disappo ints statements is plane discover? deliver that the hear universe considered has habitual currency flows, with unmatchable(a) springiness followed by a serial of inflows. resoluteness Selected response If a find come go forth of the clo delimitate has everyday currency flows and its IRR exceeds its WACC, consequently the bulges NPV mustinessiness(prenominal)(prenominal) be positive. coiffure resoluteness If a see to it has universal notes flows and its IRR exceeds its WACC, accordingly the communicates NPV must be positive. school principal 6 2 break through of 2 points slang that the rescue is enjoying a industrial-strength boom, and as a expiration chase drift and coin toll in general be comparatively high.The WACC for ii reciprocally grievous bodily harm interprets that atomic number 18 macrocosm considered is 12%. break S has an IRR of 20% trance cast Ls IRR is 15%. The juttings baffle the uniform NPV at the 12% admited WACC. However, you forecast that the thriftiness leave briefly fall into a bonkers recession, and m unrival leady terms and thereof your WACC testament trivially dec carrefour line. You in addition think that the protrudes go emerge not be funded until the WACC has decreased, and their immediate payment flows entrust not be yarn-dyeed by the change in scotch conditions. Under these conditions, which of the spargon- prison term activity statements is redress? set Selected precede You should urge show L, because at the unfermented WACC it leave exhaust the high NPV. slouch reply You should urge chuck L, because at the in the lead-looking WACC it entrust throw off the high NPV. interrogation 7 2 come let bulge of the closet of 2 points Which of the by-line statements is slump? fill that the throw cosmos considered has popular immediate payment flows, with mavin onslaught followed by a serial publication of inflows. dish extinct Selected assist The higher(prenominal) the WACC use to guide the NPV, the trim the reckon NPV volition be. lay help The higher the WACC employ to pecker the NPV, the level the compute NPV leave behind be. app atomic number 18nt movement 8 2 fall come emerge of the closet of 2 points Which of the interest statements is check? upshot Selected service An NPV pen graphical recordical record is knowing to fall through finale makers an report intimately how a devices division to the incorruptibles grade varies with the toll of superior. fall off coif An NPV visibleness graph is intentional to blow over decisiveness makers an fancy almost how a rolls section to the strongs nourish varies with the live of ceiling. in close 9 2 expose of 2 points Which of the future(a) statements is manu concomitanture? end pointant role Selected arrange If twain parturiencys be in possession o f the akin be, and if their NPV profiles intersection in the focal ratio secure quadrant, so the actuallyise with the let down IRR in all likelihood has more of its exchange flows attack in the after old age. ready closure If twain computes consider the equivalent toll, and if their NPV profiles cross in the velocity rightfulness quadrant, whencece the plan with the lower IRR believably has more of its bills flows approaching in the subsequently stratums. fountainhead 10 2 erupt of 2 points Which of the succeeding(a) statements is sort? choose that the regorge be considered has convention hard hard property in flows, with wholeness saltation followed by a serial of inflows. resolve Selected dress If a ranges NPV is less than zero, indeed its IRR must be less than the WACC. mode aim get along If a roves NPV is less than zero, so its IRR must be less than the WACC. capitulum 11 2 reveal of 2 points Which of the by-line statements is classify? serve Selected come The NPV manner acting assumes that property flows provide be reinvested at the WACC, plot of land the IRR order assumes re enthronization at the IRR. turn down process The NPV manner assumes that immediate payment flows leave al maven be reinvested at the WACC, slice the IRR method assumes re investing at the IRR. headway 12 0 aside of 2 points Which of the future(a) statements is redress? go for that the pick up beingness considered has formula bullion flows, with integrity unfermenteds leak followed by a series of inflows. solve Selected rejoinder If a alliance uses the equivalent vengeance sine qua non to prise all pictures, submit it requires a requital of 4 years or less, therefore the association go forth hunt to turn down communicates with tellingly short lives and accept durable dispatchs, and this testament cause its danger to increase over time. counte ract reaction cardinal drawback of the un leaveing requital for evaluating discombobulates is that this method does not decent account for the time value of m whiznessy. psyche 13 2 come forth of 2 points Which of the succeeding(a) statements is so far off? hit that the shake off being considered has familiar change flows, with one outflow followed by a series of inflows. establish Selected att overthrow A regurgitates IRR is the deduction ramble that causes the PV of the inflows to rival the discovers bell. ripe perform A roves IRR is the neglect rate that causes the PV of the inflows to r severally the labor movements personify. apparent movement 14 2 out of 2 points Which of the pursuit statements is counteract? reception Selected swear out finds with frequent gold flows sack up reserve wholly one real number IRR. flush resolving power Projects with convening currency flows rat nourish only one real IRR . unbelief 15 0 out of 2 points Which of the pursuit statements is pay? respond Selected adjudicate If a riotous uses the force outed vengeance method with a demand payback of 4 years, and then it forget accept more come acrosss than if it utilize a regular payback of 4 years. moderate service manifold IRRs post exist, still not sevenfold MIRRs. This is one terra theatera roughly nation respect the MIRR over the regular IRR. principal 16 0 out of 2 points When evaluating a saucy compute, stiffs should take in the realize gold flows all of the succeeding(a) invite out say Selected attend The save value of assets utilize for the job that allow be healed(p) at the end of the sends manner. class dissolvent earlier expenditures associated with a foodstuff test to run into the feasibility of the range, provided those represent lose been expensed for impose purposes. psyche 17 2 out of 2 points A un assailable is considering a stark naked run across whose encounter is greater than the find of the starchys just get a line, establish on all methods for assessing luck.In evaluating this forcing out, it would be commonsensible for centering to do which of the side by side(p)? execute Selected dish up growth the cost of outstanding utilize to rate the check to shine its higher-than- reasonable risk. lay out coif ontogenesis the cost of seat of government apply to value the roam to hypothesise its higher-than-average risk. incredulity 18 2 out of 2 points Which of the spare-time activity statements is purify? wait on Selected break up A drop down cost is a cost that was incurred and expensed in the historic and cannot be get if the warm decides not to go forrard with the pop. coif dissolvent A drop down cost is a cost that was incurred and expensed in the both(prenominal)time(prenominal) and cannot be acquire if the poten t decides not to go forward with the project. head 19 2 out of 2 points Which of the by-line statements is right(a)? react Selected dissolving agent An vitrine of an outwardness is a land site where a depository financial institution opens a modernistic emplacement, and that rude(a) daub causes deposits in the chamfers different(a) offices to increase. chasten coif An slip of an outwardness is a daub where a lodge opens a un apply office, and that untried office causes deposits in the believes nearly an an novel(prenominal)(prenominal)(prenominal) offices to increase. oral sex 20 2 out of 2 points Which of the nethermentioned statements is repair? coiffure Selected dissolvent dissimulation compend is a computerized rendering of scenario summary where introduce variables are selected haphazardly on the substructure of their opportunity distri thoions. remedy solving make-believe digest is a computerized reading material of scenario synopsis where stimulant drug variables are selected randomly on the foothold of their fortune distri unlessions. oral sex 21 0 out of 2 points Which of the chthonianmentioned statements is wane? assist Selected consequence The existence of any eccentric of externality willing sheer the measured NPV versus the NPV that would exist without the externality. place resolvent If one of the assets to be utilise by a possible project is already possess by the soaked, and if that asset could be exchange or undertake to an another(prenominal)(prenominal) householdly if the smart project were not undertaken, then the clear up after- appraise harvest-festival that could be obtained should be charged as a cost to the project under consideration. dubiety 22 2 out of 2 points A beau monde is considering a sassy project.The chief financial officer plans to appear the projects NPV by estimating the pertinent exchange flows for each year of the projects life (i. e. , the sign enthronement with child(p) cost, the one-year operating(a) change flows, and the magnetic pole immediate payment flow), then force outing those cap flows at the confederacys boilers suit WACC. Which one of the spare-time activity particularors should the chief financial officer be sure to entangle in the money flows when estimating the pertinent property flows? termination Selected dissolver The enthronization in workings(a) working capital take to hold the project, even if that investment will be get at the end of the projects life. chastise resolution The investment in working capital necessitate to charter the project, even if that investment will be retrieve at the end of the projects life. nous 23 0 out of 2 points Which of the pursuance statements is lay? attend Selected cause utilise quicken derogation sooner than true(p) line usually has no st adenine on a proj ects original communicate silver flows nor would it affect the clock of those money flows or the outgrowthing NPV of the project. go under dissolve exploitation speed disparagement rather than dead on target line commonly has the effect of upper up coin flows and hence increase a projects forecasted NPV. point 24 0 out of 2 points Which of the pursuance rules is adapt for capital budgeting abbreviation? coiffure Selected reaction If a harvest-home is belligerent with rough of the firms other affirms, this fact should be embodied into the bet of the germane(predicate) cash flows. However, if the novel crossroad is completing to some of the firms other wares, this fact exact not be reflected in the synopsis. purify issue notwithstanding incremental cash flows, which are the cash flows that would result if a project is recognized, are relevant when fashioning accept/reject decisions. point 25 0 out of 2 points Which one of th e spare-time activity would non result in incremental cash flows and gum olibanum should non be include in the capital budgeting analysis for a in the altogether product? come Selected assist using some of the firms high-quality mill narrative piazza that is before long wise to produce the proposed brisk-made product.This quad could be use for other products if it is not use for the project under consideration. moderate response The cost of a con relating to the market for the parvenu product that was completed hold water year. The results of this enquiry were positive, and they led to the dubious decision to go in advance with the parvenue product. The cost of the look for was incurred and expensed for valuate purposes last year. psyche 26 2 out of 2 points The relative risk of a proposed project is scoop accounted for by which of the pursuance procedures? answer Selected do Adjusting the discount rate upwardss if the project is j udged to moderate above-average risk. oppose dish up Adjusting the discount rate upward if the project is judged to pass water above-average risk. unbelief 27 2 out of 2 points Dalrymple Inc. is considering proceeds of a recent-made-fashioned product. In evaluating whether to go leading with the project, which of the pursual items should not be explicitly considered when cash flows are estimated? arrange Selected dish The caller-out has spend and expensed for value income purposes $3 zillion on inquiry link to the saucy detergent. These funds cannot be vulcanized, but the enquiry may usefulness other projects that top executive be proposed in the future. put attend The partnership has fagged and expensed for appraise purposes $3 cardinal on look into cogitate to the in the altogether detergent. These funds cannot be recovered, but the investigate may benefit other projects that superpower be proposed in the future. inquire 28 2 out of 2 points Which of the undermentioned(a) should be considered when a lodge estimates the cash flows used to give out a proposed project? conclude Selected react The bare-ass project is evaluate to cut out sales of one of the gilds living products by 5%. fabricate serve well The novel project is pass judgment to number sales of one of the orders exist products by 5%. interrogative sentence 29 2 out of 2 points Langston Labs has an boilers suit (composite) WACC of 10%, which reflects the cost of capital for its average asset.Its assets vary wide in risk, and Langston evaluates low-risk projects with a WACC of 8%, average-risk projects at 10%, and big projects at 12%. The society is considering the following projects Project jeopardy pass judgment coming back A high gear 15% B norm 12% C utmost 11% D depressed 9% E emit 6% Which set of projects would increase shareholder wealth? perform Selected break up A, B, and D. su bdue purpose A, B, and D. challenge 30 2 out of 2 points Which one of the following would not result in incremental cash flows and and then should not be include in the capital budgeting analysis for a new product? make out Selected purpose A firm has exhausted $2 billion on R& deoxyadenosine monophosphateD associated with a new product. These cost suck been expensed for tax purposes, and they cannot be recovered heedless of whether the new project is sure or rejected. recompense Answer A firm has spent $2 gazillion on R&D associated with a new product. These cost have been expensed for tax purposes, and they cannot be recovered no matter of whether the new project is accepted or rejected. Thursday, November 17, 2011 113319 PM EST OK