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1. A firm should never undertake an investment if accepting the project would lead to an increase in the firm’s cost of
capital.
a. True
b. False
ANSWER: False
2. Because “present value” refers to the value of cash flows that occur at different points in time, a series of present values
should not be summed to determine the value of a capital budgeting project.
a. True
b. False
ANSWER: False
3. Assuming that their NPVs based on the firm’s cost of capital are equal, the NPV of a project whose cash flows accrue
relatively rapidly will be more sensitive to changes in the discount rate than the NPV of a project whose cash flows come
in later in its life.
a. True
b. False
ANSWER: False
4. The NPV method’s assumption that cash inflows are reinvested at the cost of capital is more reasonable than the IRR’s
assumption that cash flows are reinvested at the IRR. This is an important reason that the NPV method is generally
preferred over the IRR method.
a. True
b. False
ANSWER: True
5. Under certain conditions, a project may have more than one IRR. One such condition is when, in addition to the initial
investment at time = 0, a negative cash flow (or cost) occurs at the end of the project’s life.
a. True
b. False
ANSWER: True
6. The phenomenon called “multiple internal rates of return” arises when two or more mutually exclusive projects that
have different lives are being compared.
a. True
b. False
ANSWER: False
7. The MIRR method has wide appeal for professors, but most business executives prefer the NPV method to either the
regular IRR or MIRR.
a. True
b. False
ANSWER: False
8. When evaluating mutually exclusive projects, the MIRR always leads to the same capital budgeting decisions as the
NPV method, regardless of the relative lives or sizes of the projects being evaluated.
a. True
b. False
ANSWER: False
9. In theory, any capital budgeting investment rule should depend solely on forecasted cash flows and the opportunity cost
of capital. The rule itself should not be affected by managers’ tastes, the choice of accounting method, or the profitability
of other independent projects.
a. True
b. False
ANSWER: True
10. The level of detail needed to determine capital budget expenditures related to compliance with safety and/or
environmental issues varies depending on the size and scope of the project(s).
a. True
b. False
ANSWER: True
11. A decision to undertake significant downsizing to control fixed costs is usually made by senior management, with the
decision reported to the firm’s board of directors.
a. True
b. False
ANSWER: False
12. When considering two mutually exclusive projects, the firm should always select that project whose IRR is the highest
provided the projects have the same initial cost. This statement is true regardless of whether the projects can be repeated
or not.
a. True
b. False
ANSWER: False
13. The primary reason that the NPV method is conceptually superior to the IRR method for evaluating mutually
exclusive investments is that multiple IRRs may exist.
a. True
b. False
ANSWER: False
14. The NPV and IRR methods, when used to evaluate independent and equally risky projects, will lead to different
accept/reject decisions if their IRRs are greater than the cost of capital.
a. True
b. False
ANSWER: False
15. If the IRR of normal Project X is greater than the IRR of mutually exclusive Project Y (also normal), we can conclude
that the firm should select X rather than Y if X has NPV > 0.
a. True
b. False
ANSWER: False
16. Small businesses make less use of DCF capital budgeting techniques than large businesses. This may reflect a lack of
knowledge on the part of small firms’ managers, but it may also reflect a rational conclusion that the costs of using DCF
analysis outweigh the benefits of these methods for very small firms.
a. True
b. False
ANSWER: True
17. Financing pressure or liquidity can explain the popular use of payback period in project appraisals for small firms.
a. True
b. False
ANSWER: True
18. Selecting the project that has the highest equivalent annual annuity seems to be the rule for comparing projects with
different lives. This rule should apply to both independent and mutually exclusive projects.
a. True
b. False
ANSWER: False
19. If a firm is experiencing no capital rationing, it should accept all investment proposals whose accounting rate of return
is equal to or greater than the weighted average cost of capital.
a. True
b. False
ANSWER: False
20. A decrease in the firm’s discount rate (r, or WACC) will increase projects’ NPVs, which could change the
accept/reject decision for any potential project. However, such a change would have no impact on the project’s IRR;
therefore, the accept/reject decision under the IRR method is independent of the cost of capital.
a. True
b. False
ANSWER: False
21. Normal Projects Q and R have the same NPV when the discount rate is zero. However, Project Q’s cash flows come in
faster than those of R. Therefore, we know that at any discount rate greater than zero, R will have a higher NPV than Q.
a. True
b. False
ANSWER: False
22. If you were evaluating two mutually exclusive projects for a firm with a zero cost of capital, the payback method and
NPV method would always lead to the same decision on which project to undertake.
a. True
b. False
ANSWER: False
23. The IRR of normal Project X is greater than the IRR of normal Project Y, and both IRRs are greater than zero. Also,
the NPV of X is greater than the NPV of Y at the cost of capital. If the two projects are mutually exclusive, Project X
should definitely be selected, and the investment made, provided we have confidence in the data. Put another way, it is
impossible to draw NPV profiles that would suggest not accepting Project X.
a. True
b. False
ANSWER: False
24. Theoretically speaking, hard capital rationing does not exist.

a. True
b. False
ANSWER: True
25. Which of the following statements is correct? Assume that the project being considered has normal cash flows, with
one outflow followed by a series of inflows.
a. The lower the WACC used to calculate it, the lower the calculated NPV will be.
b. If a project’s NPV is less than zero, then its IRR must be less than the WACC.
c. If a project’s NPV is greater than zero, then its IRR must be less than zero.
d. The NPV of a relatively low risk project should be found using a relatively high WACC.
ANSWER: b
26. Which statement regarding the IRR method is correct?

a. One defect of the IRR method is that it does not take account of cash flows over a project’s full life.
b. One defect of the IRR method is that it does not take account of the time value of money.
c. One defect of the IRR method is that it does not take account of the cost of capital.
d. One defect of the IRR method is that it does not assume that the cash flows to be received from a project can
be reinvested at a rate other than the IRR itself.
ANSWER: d
a. A project’s regular IRR is found by discounting the cash inflows at the WACC to find the present value (PV),
then compounding this PV to find the IRR.
b. If a project’s IRR is greater than the WACC, then its NPV must be negative.
c. To find a project’s IRR, we must solve for the discount rate that causes the PV of the inflows to equal the PV
of the project’s costs.
d. To find a project’s IRR, we must find a discount rate that is equal to the WACC.
ANSWER: c
a. A project’s regular IRR is found by compounding the initial cost at the WACC to find the terminal value (TV),
then discounting the TV at the WACC.
b. A project’s regular IRR is found by compounding the cash inflows at the WACC to find the present value
(PV), then discounting to find the IRR.
c. If a project’s IRR is smaller than the WACC, then its NPV will be positive.
d. A project’s IRR is the discount rate that causes the PV of the inflows to equal the project’s cost.
ANSWER: d
29. Which statement regarding normal cash flows is correct?

a. If a project has normal cash flows, then its IRR must be positive.
b. If a project has normal cash flows, then its MIRR must be positive.
c. If a project has normal cash flows, then it will have exactly two real IRRs.
d. If a project has normal cash flows, then it can have only one real IRR, whereas a project with non-normal cash
flows might have more than one real IRR.
ANSWER: d
30. Which statement regarding normal cash flows is correct?

a. Projects with normal cash flows can have only one real IRR.
b. Projects with normal cash flows can have two or more real IRRs.
c. The “multiple IRR problem” can arise if a project’s cash flows are normal.
d. Projects with non-normal cash flows are almost never encountered in the real world.
ANSWER: a
31. Which statement regarding payback is true?
a. The regular payback method recognizes all cash flows over a project’s life.
b. The discounted payback method recognizes all cash flows over a project’s life, and it also adjusts these cash
flows to account for the time value of money.
c. The regular payback method was widely used years ago, but virtually no companies even calculate the
payback today.
d. The regular payback is useful as an indicator of a project’s liquidity because it gives managers an idea of how
long it will take to recover the funds invested in a project.
ANSWER: d
a. The longer a project’s payback period, the more desirable the project is normally considered to be by this
criterion.
b. One drawback of the payback criterion for evaluating projects is that this method does not properly account
for the time value of money.
c. If a project’s payback is positive, then the project should be rejected because it must have a negative NPV.
d. The regular payback ignores cash flows beyond the payback period, but the discounted payback method
overcomes this problem.
ANSWER: b
33. Which statement regarding payback is true?

a. The shorter a project’s payback period, the less desirable the project is normally considered to be by this
criterion.
b. One drawback of the payback criterion for evaluating projects is that this method does not take account of cash
flows beyond the payback period.
c. If a project’s payback is positive, then the project should be accepted because it must have a positive NPV.
d. The regular payback ignores cash flows beyond the payback period, but the discounted payback method
overcomes this problem.
ANSWER: b
34. Assume a project has normal cash flows. All else being equal, which of the following statements is correct?
a. The project’s IRR increases as the WACC declines.
b. The project’s NPV increases as the WACC declines.
c. The project’s MIRR is unaffected by changes in the WACC.
d. The project’s regular payback increases as the WACC declines.
ANSWER: b
35. Which of the following statements is correct?

a. The IRR is generally regarded by academics as being the best single method for evaluating capital budgeting
projects.
b. The payback method is generally regarded by academics as being the best single method for evaluating capital
budgeting projects.
c. The discounted payback method is generally regarded by academics as being the best single method for
evaluating capital budgeting projects.
d. The NPV is generally regarded by academics as being the best single method for evaluating capital budgeting
projects.
ANSWER: d
36. Which statement about an NPV profile graph is true?

a. An NPV profile graph shows how a project’s payback varies as the cost of capital changes.
b. The NPV profile graph for a normal project will generally have a positive (upward) slope as the life of the
project increases.
c. An NPV profile graph is designed to give decision makers an idea about how a project’s risk varies with its
life.
d. An NPV profile graph is designed to give decision makers an idea about how a project’s contribution to the
firm’s value varies with the cost of capital.
ANSWER: d
37. Which statement about the NPV is true?

a. The NPV method was once the favourite of academics and business executives, but today most authorities
regard the MIRR as being the best indicator of a project’s profitability.
b. The NPV method is regarded by most academics as being the best indicator of a project’s profitability; hence,
most academics recommend that firms use only this one method.
c. A project’s NPV depends on the total amount of cash flows the project produces, but because the cash flows
are discounted at the WACC, it does not matter if the cash flows occur early or late in the project’s life.
d. The NPV and IRR methods may give different recommendations regarding which of two mutually exclusive
projects should be accepted, but they always give the same recommendation regarding the acceptability of a
normal, independent project.
ANSWER: d
a. The higher the WACC used to calculate the NPV, the lower the calculated NPV will be.
b. If a project’s NPV is greater than zero, then its IRR must be less than the WACC.
c. If a project’s NPV is greater than zero, then its IRR must be less than zero.
d. The NPVs of relatively risky projects should be found using relatively low WACCs.
ANSWER: a

a. The NPV method assumes that cash flows will be reinvested at the WACC, while the IRR method assumes
reinvestment at the IRR.
b. The NPV method assumes that cash flows will be reinvested at the risk-free rate, while the IRR method
assumes reinvestment at the IRR.
c. The NPV method assumes that cash flows will be reinvested at the WACC, while the IRR method assumes
reinvestment at the risk-free rate.
d. The NPV method does not consider all relevant cash flows, particularly cash flows beyond the payback period.
ANSWER: a
a. If Project A has a higher IRR than Project B, then Project A must have the lower NPV.
b. If Project A has a higher IRR than Project B, then Project A must also have a higher NPV.
c. The IRR calculation implicitly assumes that all cash flows are reinvested at the WACC.
d. If a project has normal cash flows and its IRR exceeds its WACC, then the project’s NPV must be positive.
ANSWER: d
41. With respect to the required level of capital budget analysis, _____would likely require the least level of investigation
while ____ would likely require the greatest level of analysis.
1. expansion into new products or markets
2. contract decisions
3. replacement needs to continue profitable operations
4. expansion into existing products or markets
a. 4,1
b. 3,2
c. 1,2
d. 4,2
ANSWER: b
42. Projects A and B have identical expected lives and identical initial cash outflows (costs). However, most of one
project’s cash flows come in the early years, while most of the other project’s cash flows occur in the later years. The two
NPV profiles are given below:
Which of the following statements is correct?

a. More of Project A’s cash flows occur in the later years.
b. More of Project B’s cash flows occur in the later years.
c. We must have information on the cost of capital in order to determine which project has the larger early cash
flows.
d. The NPV profile graph is inconsistent with the statement made in the problem.
ANSWER: a
43. Projects S and L both have an initial cost of $10,000, followed by a series of positive cash inflows. Project S’s
undiscounted net cash flows total $20,000, while L’s total undiscounted flows are $30,000. At a WACC of 10%, the two
projects have identical NPVs. Which project’s NPV is more sensitive to changes in the WACC?
a. Project S
b. Project L
c. Both projects are equally sensitive to changes in the WACC since their NPVs are equal at all costs of capital.
d. Neither project is sensitive to changes in the discount rate, since both have NPV profiles that are horizontal.
ANSWER: b
44. Projects C and D are mutually exclusive and have normal cash flows. Project C has a higher NPV if the WACC is less
than 12%, whereas Project D has a higher NPV if the WACC exceeds 12%. Which of the following statements is correct?
a. Project D has a higher IRR.
b. Project D is probably larger in scale than Project C.
c. Project C probably has a faster payback.
d. Project C has a higher IRR.
ANSWER: a
45. Which statement about multiple IRRs is true?

a. For a project to have more than one IRR, both IRRs must be greater than the WACC.
b. If two projects are mutually exclusive, then they are likely to have multiple IRRs.
c. If a project is independent, then it cannot have multiple IRRs.
d. Multiple IRRs can occur only if the signs of the cash flows change more than once.
ANSWER: d
46. The regular payback method has a number of disadvantages, some of which are listed below. Which of these items is
NOT a disadvantage of this method?
a. It lacks an objective, market-determined benchmark for making decisions.
b. It ignores cash flows beyond the payback period.
c. It does not directly account for the time value of money.
d. It does not provide any indication regarding a project’s liquidity.
ANSWER: d

a. If a project with normal cash flows has an IRR greater than the WACC, the project must have a positive NPV.
b. If Project A’s IRR exceeds Project B’s, then A must have the higher NPV.
c. A project’s MIRR can never exceed its IRR.
d. If a project with normal cash flows has an IRR less than the WACC, the project must have a positive NPV.
ANSWER: a

a. The MIRR and NPV decision criteria can never conflict.
b. The IRR method can never be subject to the multiple IRR problem, while the MIRR method can be.
c. One reason some people prefer the MIRR to the regular IRR is that the MIRR is based on what is generally a
more reasonable assumption about the reinvestment rate than the regular IRR.
d. The higher the WACC, the shorter the discounted payback period.
ANSWER: c

a. For independent projects, the NPV, IRR, MIRR, and discounted payback (using a payback requirement of
three years or less) methods always lead to the same accept/reject decisions for a given project.
b. For mutually exclusive projects with normal cash flows, the NPV and MIRR methods can never conflict, but
their results could conflict with the discounted payback and the regular IRR methods.
c. Multiple IRRs can exist, but not multiple MIRRs. This is one reason some people favour the MIRR over the
regular IRR.
d. If a firm uses the discounted payback method with a required payback of four years, then it will accept more
projects than if it used as its cutoff criterion a regular payback of four years.
ANSWER: c

a. For a project with normal cash flows, any change in the WACC will change both the NPV and the IRR.
b. To find the MIRR, we first compound cash flows at the regular IRR to find the TV, and then we discount the
TV at the WACC to find the PV.
c. The NPV and IRR methods both assume cash flows can be reinvested at the WACC. However, the MIRR
method assumes reinvestment at the MIRR itself.
d. If two projects have the same cost, and if their NPV profiles cross in the upper right quadrant, then the project
with the lower IRR probably has more of its cash flows coming in the later years.
ANSWER: d

a. One advantage of the NPV over the IRR is that NPV takes account of cash flows over a project’s full life
whereas IRR does not.
b. One advantage of the NPV over the IRR is that NPV assumes that cash flows will be reinvested at the WACC,
whereas IRR assumes that cash flows are reinvested at the IRR. The NPV assumption is generally more likely
to be appropriate.
c. One advantage of the NPV over the MIRR method is that NPV takes account of cash flows over a project’s
full life whereas MIRR does not.
d. One advantage of the NPV over the MIRR method is that NPV discounts cash flows whereas the MIRR is
based on undiscounted cash flows.
ANSWER: b

a. The IRR method appeals to some managers because it gives an estimate of the rate of return on projects rather
than a dollar amount, which the NPV method provides.
b. The discounted payback method eliminates all of the problems associated with the payback method.
c. When evaluating independent projects, the NPV and IRR methods often yield conflicting results regarding a
project’s acceptability.
d. To find the MIRR, we discount the TV at the IRR.
ANSWER: a
53. Projects S and L are equally risky, mutually exclusive, and have normal cash flows. Project S has an IRR of 15%,
while Project L’s IRR is 12%. The two projects have the same NPV when the WACC is 7%. Which of the following
statements is correct?
a. If the WACC is 10%, both projects will have positive NPVs.
b. If the WACC is 6%, Project S will have the higher NPV.
c. If the WACC is 13%, Project S will have the lower NPV.
d. If the WACC is 10%, both projects will have a negative NPV.
ANSWER: a
54. Westchester Corp. is considering two equally risky, mutually exclusive projects, both of which have normal cash
flows. Project A has an IRR of 11%, while Project B’s IRR is 14%. When the WACC is 8%, the projects have the same
NPV. Given this information, which of the following statements is correct?
a. If the WACC is 13%, Project A’s NPV will be higher than Project B’s.
b. If the WACC is 9%, Project A’s NPV will be higher than Project B’s.
c. If the WACC is 6%, Project B’s NPV will be higher than Project A’s.
d. If the WACC is 9%, Project B’s NPV will be higher than Project A’s.
ANSWER: d
55. You are considering two mutually exclusive, equally risky, projects. Both have IRRs that exceed the WACC that is
used to evaluate them. Which of the following statements is correct? Assume that the projects have normal cash flows,
with one outflow followed by a series of inflows.
a. If the two projects’ NPV profiles do not cross in the upper right quadrant, then there will be a sharp conflict as
to which one should be selected.
b. If the cost of capital is greater than the crossover rate, then the IRR and the NPV criteria will not result in a
conflict between the projects. One project will rank higher by both criteria.
c. For a conflict to exist between NPV and IRR, the initial investment cost of one project must exceed the cost of
the other.
d. For a conflict to exist between NPV and IRR, one project must have an increasing stream of cash flows over
time while the other has a decreasing stream. If both sets of cash flows are increasing or decreasing, then it
would be impossible for a conflict to exist, even if one project is larger than the other.
ANSWER: b
56. Project X’s IRR is 19% and Project Y’s IRR is 17%. The projects have the same risk and the same lives, and each has
constant cash flows during each year of their lives. If the WACC is 10%, Project Y has a higher NPV than X. Given this
information, which of the following statements is correct?
a. The crossover rate between the two projects must be less than 10%.
b. The crossover rate between the two projects must be greater than 10%.
c. If the WACC is 8%, Project X will have the higher NPV.
d. If the WACC is 18%, Project Y will have the higher NPV.
ANSWER: b
57. Projects S and L both have normal cash flows, and the projects have the same risk; hence, both are evaluated with the
same WACC, 10%. However, S has a higher IRR than L. Which of the following statements is correct?
a. Project S must have a higher NPV than Project L.
b. If Project S has a positive NPV, then Project L must also have a positive NPV.
c. If the WACC falls, then each project’s IRR will increase.
d. If Projects S and L have the same NPV at the current WACC, 10%, then Project L, the one with the lower
IRR, would have a higher NPV if the WACC used to evaluate the projects declined.
ANSWER: d
58. Which statement about a project’s IRR is correct? Assume that all projects being considered have normal cash flows
and are equally risky.
a. If a project’s IRR is equal to its WACC, then, under all reasonable conditions, the project’s NPV must be
negative.
b. If a project’s IRR is equal to its WACC, then, under all reasonable conditions, the project’s IRR must be
negative.
c. If a project’s IRR is equal to its WACC, then, under all reasonable conditions, the project’s NPV must be zero.
d. There is no necessary relationship between a project’s IRR, its WACC, and its NPV.
ANSWER: c
59. A company is choosing between two projects. The larger project has an initial cost of $100,000, annual cash flows of
$30,000 for 5 years, and an IRR of 15.24%. The smaller project has an initial cost of $50,000, annual cash flows of
$16,000 for 5 years, and an IRR of 16.63%. The projects are equally risky. Which of the following statements is correct?
a. Since the smaller project has the higher IRR, the two projects’ NPV profiles cannot cross, and the smaller
project’s NPV will be higher at all positive values of WACC.
b. Since the smaller project has the higher IRR, the two projects’ NPV profiles will cross, and the larger project
will look better based on the NPV at all positive values of WACC.
c. Since the smaller project has the higher IRR but the larger project has the higher NPV at a zero discount rate,
the two projects’ NPV profiles will cross, and the larger project will have the higher NPV if the WACC is less
than the crossover rate.
d. Since the smaller project has the higher IRR and the larger NPV at a zero discount rate, the two projects’ NPV
profiles will cross, and the larger smaller project will look better if the WACC is less than the crossover rate.
ANSWER: c
60. McCall Manufacturing has a WACC of 10%. The firm is considering two normal, equally risky, mutually exclusive,
but not repeatable projects. The two projects have the same investment costs, but Project A has an IRR of 15%, while
Project B has an IRR of 20%. Which of the following statements is correct?
a. Each project must have a negative NPV.
b. Since the projects are mutually exclusive, the firm should always select Project B.
c. If the crossover rate is 8%, Project B will have the higher NPV.
d. If the crossover rate is 8%, Project A will have a higher NPV than Project B.
ANSWER: c
61. Projects A and B are mutually exclusive and have normal cash flows. Project A has an IRR of 15% and Project B’s
IRR is 20%. The company’s WACC is 12%, and at that rate Project A has the higher NPV. Which of the following
statements is correct?
a. The crossover rate for the two projects must be less than 12%.
b. Assuming the timing pattern of the two projects’ cash flows is the same, Project B probably has a higher cost
(and larger scale).
c. Assuming the two projects have the same scale, Project B probably has a faster payback than Project A.
d. Since B has the higher IRR, then it must also have the higher NPV if the crossover rate is less than the WACC
of 12%.
ANSWER: c
62. You are on the staff of Camden Inc. The CFO believes project acceptance should be based on the NPV, but Steve
Camden, the president, insists that no project can be accepted unless its IRR exceeds the project’s risk-adjusted WACC.
Now you must make a recommendation on a project that has a cost of $15,000 and two cash flows: $110,000 at the end of
Year 1 and –$100,000 at the end of Year 2. The president and the CFO both agree that the appropriate WACC for this
project is 10%. At 10%, the NPV is $2,355.37, but you find two IRRs, one at 6.33% and one at 5.27%, and a MIRR of
11.32%. Which of the following statements best describes your optimal recommendation, i.e., the analysis and
recommendation that is best for the company and least likely to get you in trouble with either the CFO or the president?
a. You should recommend that the project be rejected because its NPV is negative and its IRR is less than the
WACC.
b. You should recommend that the project be rejected because, although its NPV is positive, it has an IRR that is
less than the WACC.
c. You should recommend that the project be accepted because (1) its NPV is positive and (2) although it has two
IRRs, in this case it would be better to focus on the MIRR, which exceeds the WACC. You should explain this
to the president and tell him that that the firm’s value will increase if the project is accepted.
d. You should recommend that the project be rejected because (1) its NPV is positive and (2) it has two IRRs,
one of which is less than the WACC, which indicates that the firm’s value will decline if the project is
accepted.
ANSWER: c
63. Which statement about a project’s MIRR is correct? Assume that the project being considered has normal cash flows,
with one outflow followed by a series of inflows.
a. A project’s MIRR is always greater than its regular IRR.
b. A project’s MIRR is always less than its regular IRR.
c. If a project’s IRR is greater than its WACC, then the MIRR will be less than the IRR.
d. If a project’s IRR is greater than its WACC, then the MIRR will be greater than the IRR.
ANSWER: c
64. Which statement about a project’s MIRR is correct? Assume that the project being considered has normal cash flows,
with one cash outflow at t = 0 followed by a series of positive cash flows.
a. A project’s MIRR is always greater than its regular IRR.
b. A project’s MIRR is always less than its regular IRR.
c. To find a project’s MIRR, we compound cash inflows at the regular IRR and then find the discount rate that
causes the PV of the terminal value to equal the initial cost.
d. To find a project’s MIRR, the textbook procedure compounds cash inflows at the WACC and then finds the
discount rate that causes the PV of the terminal value to equal the initial cost.
ANSWER: d
65. Edmondson Electric Systems is considering a project that has the following cash flow and WACC data. What is the
project’s NPV?
WACC: 10.00%
Year: 0 1 2 3
Cash flows: –$1,000 $500 $500 $500
a. $243.43
b. $255.60
c. $268.38
d. $281.80
ANSWER: a
66. Johnson Enterprises is considering a project that has the following cash flow and WACC data. What is the project’s
NPV?
WACC: 10.00%
Year: 0 1 2 3 4
Cash flows: –$1,000 $350 $350 $350 $350
a. $98.78
b. $103.98
c. $109.45
d. $114.93
ANSWER: c
67. Humboldt Inc. is considering a project that has the following cash flow and WACC data. What is the project’s NPV?
WACC: 9.00%
Year: 0 1 2 3 4 5
Cash flows: –$1,000 $300 $300 $300 $300 $300
a. $135.94
b. $143.09
c. $150.62
d. $166.90
ANSWER: d
68. Tucker Corp. is considering a project that has the following cash flow data. What is the project’s IRR?
Year: 0 1 2 3
Cash flows: –$1,000 $450 $450 $450
a. 15.82%
b. 16.65%
c. 17.48%
d. 18.36%
ANSWER: b
69. Levin Company is considering a project that has the following cash flow data. What is the project’s IRR?
Year: 0 1 2 3 4
Cash flows: –$1,000 $400 $400 $400 $400
a. 15.94%
b. 17.71%
c. 19.68%
d. 21.86%
ANSWER: d
70. Wells Inc. is considering a project that has the following cash flow data. What is the project’s payback?
Year: 0 1 2 3
Cash flows: –$1,000 $500 $500 $500
a. 1.62 years
b. 1.80 years
c. 2.00 years
d. 2.20 years
ANSWER: c
71. Van Auken Inc. is considering a project that has the following cash flows:
Year Cash Flow
0 –$1,000
1 $400
2 $300
3 $500
4 $400
The company’s WACC is 10%. What are the project’s payback, IRR, and NPV?
a. payback = 2.4, IRR = 10.00%, NPV = $600
b. payback = 2.4, IRR = 21.22%, NPV = $260
c. payback = 2.6, IRR = 21.22%, NPV = $300
d. payback = 2.6, IRR = 21.22%, NPV = $260
ANSWER: d
72. Adler Enterprises is considering a project that has the following cash flow and WACC data. What is the project’s
NPV?
WACC: 10.00%
Year: 0 1 2 3
Cash flows: –$1,000 $450 $460 $470
a. $142.37
b. $149.49
c. $156.97
d. $164.82
ANSWER: a
73. Babcock Inc. is considering a project that has the following cash flow and WACC data. What is the project’s NPV?
WACC: 10.00%
Year: 0 1 2 3
Cash flows: –$950 $500 $400 $300
a. $54.62
b. $57.49
c. $60.52
d. $63.54
ANSWER: c
74. Rappaport Enterprises is considering a project that has the following cash flow and WACC data. What is the project’s
NPV?
WACC: 10.00%
Year: 0 1 2 3 4
Cash flows: –$1,000 $400 $405 $410 $415
a. $211.29
b. $234.77
c. $260.85
d. $289.84
ANSWER: d
75. Barry Company is considering a project that has the following cash flow and WACC data. What is the project’s NPV?
WACC: 10.00%
Year: 0 1 2 3 4 5
Cash flows: –$1,200 $400 $395 $390 $385 $380
a. $253.81
b. $282.01
c. $310.21
d. $341.23
ANSWER: b
76. Choi Computer Systems is considering a project that has the following cash flow data. What is the project’s IRR?
Year: 0 1 2 3
Cash flows: –$1,000 $450 $470 $490
a. 13.89%
b. 15.43%
c. 17.15%
d. 19.05%
ANSWER: d
77. Rentz Recreation Inc. is considering a project that has the following cash flow data. What is the project’s IRR?
Year: 0 1 2 3 4
Cash flows: –$650 $250 $230 $210 $190
a. 14.04%
b. 15.44%
c. 16.99%
d. 18.69%
ANSWER: a
78. Thompson Stores is considering a project that has the following cash flow data. What is the project’s IRR?
Year: 0 1 2 3 4 5
Cash –$1,000 $300 $295 $290 $285 $270
flows:
a. 11.16%
b. 12.40%
c. 13.78%
d. 15.16%
ANSWER: c
79. ZumBahlen Inc. is considering the following mutually exclusive projects:
Project A Project B
Year Cash Flow Cash Flow
0 –$5,000 –$5,000
1 200 3,000
2 800 3,000
3 3,000 800
4 5,000 200
At what cost of capital will the NPV of the two projects be the same? (That is, what is the “crossover” rate?)
a. 16.15%
b. 16.74%
c. 17.33%
d. 17.80%
ANSWER: a
80. Steve Hawke is a football star who has been offered contracts by two different teams. The payments (in millions of
dollars) under the two contracts are shown below:
Team A Team B
Year Cash Payment Cash Payment
0 $8.0 $2.5
1 4.0 4.0
2 4.0 4.0
3 4.0 8.0
4 4.0 8.0
Steve plans to accept the contract that provides him with the highest NPV. At what discount rate would he be indifferent
between the two contracts?
a. 10.85%
b. 11.35%
c. 12.66%
d. 13.98%
ANSWER: b
81. Aubey Inc. is considering two projects that have the following cash flows:
Project 1 Project 2
0 –$2,000 –$1,900
1 500 1,100
2 700 900
3 800 800
4 1,000 600
5 1,100 400
At what cost of capital would the two projects have the same NPV?
a. 4.73%
b. 5.85%
c. 6.70%
d. 7.50%
ANSWER: b
82. Anderson Associates is considering two mutually exclusive projects that have the following cash flows:
Project A Project B
0 –$10,000 –$8,000
1 1,000 7,000
2 2,000 1,000
3 6,000 1,000
4 6,000 1,000
At what cost of capital do the two projects have the same NPV? (That is, what is the crossover rate?)
a. 11.20%
b. 12.26%
c. 13.03%
d. 14.15%
ANSWER: c
83. Flint Fruits is considering two equally risky, mutually exclusive projects, Projects A and B, that have the following
cash flows:
Year Project A Project B
0 –$100,000 –$100,000
1 40,000 30,000
2 25,000 15,000
3 70,000 80,000
4 40,000 55,000
At what WACC would the two projects have the same NPV?
a. 9.56%
b. 10.33%
c. 11.21%
d. 12.55%
ANSWER: c
84. Rivoli Roofing is considering mutually exclusive Projects A and B, which have the following cash flows:
Project A Project B
0 –$200 –$300
1 20 90
2 30 70
3 40 60
4 50 50
5 60 40
At what cost of capital would the two projects have the same NPV?
a. 6.22%
b. 7.11%
c. 8.45%
d. 9.32%
ANSWER: d
85. Edelman Electric Systems is considering a project that has the following cash flow and WACC data. What is the
project’s MIRR? Note that a project’s projected MIRR can be less than the WACC (and even negative), in which case it
will be rejected.
WACC: 10.00%
Year: 0 1 2 3
Cash flows: –$800 $350 $350 $350
a. 9.58%
b. 10.64%
c. 11.82%
d. 13.14%
ANSWER: d
86. Hindelang Inc. is considering a project that has the following cash flow and WACC data. What is the project’s MIRR?
Note that a project’s projected MIRR can be less than the WACC (and even negative), in which case it will be rejected.
WACC: 10.00%
Year: 0 1 2 3 4
Cash flows: –$900 $300 $320 $340 $360
a. 12.61%
b. 14.01%
c. 15.41%
d. 16.95%
ANSWER: b
87. Stewart Associates is considering a project that has the following cash flow data. What is the project’s payback?
Year: 0 1 2 3 4 5
Cash flows: –$1,000 $300 $310 $320 $330 $340
a. 2.34 years
b. 2.60 years
c. 2.89 years
d. 3.21 years
ANSWER: d
88. Garvin Enterprises is considering a project that has the following cash flow and WACC data. What is the project’s
discounted payback?
WACC: 10.00%
Year: 0 1 2 3
Cash flows: –$1,000 $500 $500 $500
a. 2.12 years
b. 2.35 years
c. 2.59 years
d. 2.85 years
ANSWER: b
89. Bey Bikes is considering a project that has the following cash flow and WACC data. What is the project’s discounted
payback?
WACC: 10.00%
Year: 0 1 2 3 4
Cash flows: –$1,000 $525 $485 $445 $405
a. 1.72 years
b. 1.92 years
c. 2.13 years
d. 2.36 years
ANSWER: d
90. Walker & Campsey wants to invest in a new computer system, and management has narrowed the choice to Systems
A and B.
System A requires an up-front cost of $100,000, after which it generates positive after-tax cash flows of $60,000 at the
end of each of the next two years. System B also requires an up-front cost of $100,000, after which it generates positive
after-tax cash flows of $48,000 at the end of each of the next three years. The company’s cost of capital is 11%. Based on
the equivalent annual annuity, which system will be chosen?
a. A for $1,622.88
b. B for $1,622.88
c. A for $7,083.47
d. B for $7,083.47
ANSWER: d
91. Mountain Fresh Water Company is considering two mutually exclusive machines. Machine A has an up-front cost of
$100,000 (CF0 = –100,000), and it produces positive after-tax cash inflows of $40,000 a year at the end of each of the
next six years. Machine B has an up-front cost of $50,000(CF0 = ?50,000), and it produces after-tax cash inflows of
$30,000 a year at the end of the next three years. The company’s cost of capital is 10.5%. Based on the equivalent annual
annuity, which machine will be chosen?
a. Afor$71,687
b. A for $16,702
c. B for $23,954
d. B for $9,718
ANSWER: b
92. A small manufacturer is considering two alternative machines. Machine A costs $1.0 million, has an expected life of 5
years, and generates after-tax cash flows of $350,000 per year. At the end of 5 years, the salvage value of the machine is
zero, but the company will be able to purchase another Machine A at a cost of $1.2 million. The second Machine A will
generate after-tax cash flows of $375,000 a year for another 5 years, at which time its salvage value will again be zero.
Alternatively, the company can buy Machine B at a cost of $1.5 million today. Machine B will produce after-tax cash
flows of $400,000 a year for 10 years, after which it will have an after-tax salvage value of $100,000. Assume that the
cost of capital is 12%. Based on the equivalent annual annuity, if the company chooses the machine that adds the most
value to the firm, by how much will the company’s value increase per year?
a. $792,286.54
b. $347,802.00
c. $140,227.71
d. $61,557.88
ANSWER: c
93. Pinkerton Truck Rental is considering two mutually exclusive engine development projects. The RPX design has an
expected life of four years and projected cash inflows are $3.6 million at the end of each of the first two years and $1.8
million in each of the next two years. The RPB design is more flexible and has an eight-year life. The projected end-of-
year flows from the RPB design are $2.4 million in each of the first two years and $2.0 million in each of the next six
years. Both projects require an initial investment of $5.4 million, and Pinkerton’s cost of capital is 12%. What is the NPV
(on an eight-year extended basis) of the project with the most value to the company?
a. $3.976 million
b. $4.325 million
c. $5.085 million
d. $5.211 million
ANSWER: d
94. Mills Corp. is considering two mutually exclusive machines. Machine A requires an up-front expenditure at t = 0 of
$450,000, has an expected life of two years, and will generate positive after-tax cash flows of $350,000 per year (all cash
flows are realized at the end of the year) for two years. At the end of two years, the machine will have zero salvage value,
but every two years the company can purchase a replacement machine with the same cost and identical cash inflows.
Alternatively, it can choose Machine B, which requires an expenditure of $1 million at t = 0, has an expected life of four
years, and will generate positive after-tax cash flows of $350,000 per year (all cash flows are realized at year-end). At the
end of four years, Machine B will have an after-tax salvage value of $100,000.
The cost of capital is 10%. What is the NPV (on an extended four-year life) of the better machine?
a. $157,438
b. $177,754
c. $287,552
d. $355,508
ANSWER: c
95. Last month, Smith Systems Inc. decided to accept the project whose cash flows are shown below. However, before
actually starting the project, the Bank of Canada took actions that lowered interest rates and therefore Smith’s WACC. By
how much did the change in the WACC affect the project’s forecasted NPV? Assume that the Bank of Canada’s action
does not affect the cash flows.
New WACC: 8.00% Old WACC: 11.00%

Year: 0 1 2 3
Cash flows: –$1,000 $500 $500 $500
a. $57.18
b. $60.19
c. $63.36
d. $66.69
ANSWER: d
96. The Bank of Canada recently shifted its monetary policy, causing Lasik Vision’s WACC to change. Lasik had recently
analyzed the project whose cash flows are shown below. However, the CFO wants to reconsider this and all other
proposed projects in view of the Bank of Canada’s action. How much did the changed WACC cause the forecasted NPV
to change? Assume that the Bank of Canada’s action does not affect the cash flows.
New WACC: 7.00% Old WACC: 10.00%

Year: 0 1 2 3
Cash flows: –$1,000 $500 $520 $540
a. $72.27
b. $75.88
c. $79.68
d. $83.66
ANSWER: a
97. Sorenson Stores is considering a project that has the following cash flows:
Year Cash Flow

0 CF0 = ?
1 $2,000
2 3,000
3 3,000
4 1,500
The project has a payback of 2.5 years, and the firm’s cost of capital is 12%. What is the project’s NPV?
a. $577.68
b. $765.91
c. $1,049.80
d. $2,761.32
ANSWER: b
98. A firm is considering Projects S and L, whose cash flows are shown below. These projects are mutually exclusive,
equally risky, and not repeatable. The CEO wants to use the IRR criterion, while the CFO favours the NPV method, and
you were hired to advise the firm on the best procedure. If the CEO’s preferred criterion is used, how much value will the
firm lose as a result of this decision?
WACC: 13.00%
0 1 2 3 4
CFS –$1,025 $375 $380 $385 $390
CFL –$2,150 $750 $759 $768 $777
a. $5.83
b. $6.14
c. $6.46
d. $6.79
ANSWER: c
99. Scanlon Inc. is considering Projects S and L, whose cash flows are shown below. These projects are mutually
exclusive, equally risky, and not repeatable. If the decision is made by choosing the project with the higher IRR, how
much value will be foregone? Note that under certain conditions, choosing projects on the basis of the IRR will not cause
any value to be lost because the one with the higher IRR will also have the higher NPV.
WACC: 10.00%
0 1 2 3 4
CFS –$2,050 $750 $760 $770 $780
CFL –$4,300 $1,500 $1,518 $1,536 $1,554
a. $146.59
b. $154.30
c. $162.42
d. $178.67
ANSWER: c
100. Moerdyk & Co. is considering Projects S and L, whose cash flows are shown below. These projects are mutually
much value will be foregone? Note that under certain conditions choosing projects on the basis of the IRR will not cause
any value to be lost because the one with the higher IRR will also have the higher NPV, i.e., no conflict will exist.
WACC: 12.00%
0 1 2 3 4
CFS –$1,025 $650 $450 $250 $50
CFL –$1,025 $100 $300 $500 $700
a. –$1.44
b. –$1.30
c. –$1.17
d. $0.00
ANSWER: d
101. Sadik Company is considering Projects S and L, whose cash flows are shown below. These projects are mutually
much value will be foregone? Note that under some conditions choosing projects on the basis of the IRR will cause $0.00
value to be lost.
WACC: 8.00%
0 1 2 3 4
CFS –$1,050 $675 $650
CFL –$1,050 $360 $360 $360 $360
a. $9.09
b. $10.10
c. $11.10
d. $12.22
ANSWER: b
102. Nast Inc. is considering Projects S and L, whose cash flows are shown below. These projects are mutually exclusive,
equally risky, and not repeatable. If the decision is made by choosing the project with the higher MIRR rather than the one
with the higher NPV, how much value will be foregone? Note that under some conditions choosing projects on the basis
of the MIRR will cause $0.00 value to be lost.
WACC: 9.00%
0 1 2 3 4
CFS –$1,100 $375 $375 $375 $375
CFL –$2,200 $725 $725 $725 $725
a. $24.71
b. $27.46
c. $30.51
d. $33.90
ANSWER: d
103. Yonan Inc. is considering Projects S and L, whose cash flows are shown below. These projects are mutually
exclusive, equally risky, and not repeatable. If the decision is made by choosing the project with the shorter payback,
some value may be foregone. How much value will be lost in this instance? Note that under some conditions choosing
projects on the basis of the shorter payback will not cause value to be lost.
WACC: 10.00%
0 1 2 3 4
CFS –$1,000 $500 $800 $0 $0
CFL –$2,100 $400 $800 $800 $1,000
a. $55.16
b. $66.42
c. $78.79
d. $93.16
ANSWER: d
104. Pappas Products is considering Projects S and L, whose cash flows are shown below. These projects are mutually
exclusive, equally risky, and not repeatable. The CEO believes the IRR is the best selection criterion, while the CFO
advocates the MIRR. If the decision is made by choosing the project with the higher IRR rather than the one with the
higher MIRR, how much, if any, value will be foregone? Note that under some conditions the choice will have no effect
on the value gained or lost.
WACC: 11.00%
0 1 2 3 4
CFS –$1,100 $550 $600 $100 $100
CFL –$2,700 $650 $725 $800 $1,400
a. –$1.60
b. –$1.44
c. –$1.30
d. $0.00
ANSWER: d
105. Which if the following is best description of the IRR?

a. The IRR is the discount rate that equates the present value of the cash outflows (or costs) with the present
value of the cash inflows.
b. The IRR is the discount rate that results in the present value of the cash outflows (or costs) being less than the
present value of the cash inflows
c. The IRR is the discount rate that results in the present value of the cash outflows (or costs) being greater than
the present value of the cash inflows
d.
d. The IRR is that discount rate that equates the present value of the cash outflows (or costs) with the net present
value of the firm’s net income.
ANSWER: a
106. Project S has a pattern of high cash flows in its early life, while Project L has a longer life, with large cash flows late
in its life. Neither has negative cash flows after Year 0, and at the current cost of capital, the two projects have identical
NPVs. Now, suppose interest rates and money costs decline, what will happen to projects S and L?
a. Other things held constant, this change will cause L to become preferred to S.
b. Other things held constant, this change will cause S to become preferred to L.
c. Other things held constant, this change will cause L and S to have the same NPV.
d. Other things held constant, money and interest rates will not affect the financial outcomes of S and L.
ANSWER: a
107. Project A and B both have positive NPVs. If A and B are mutually exclusive, others thing held constant, which
project will management accept?
a. Management will accept the project with the lower NPV.
b. Management will accept the project with the higher NPV.
c. Management will accept both A and B since they both have positive NPVs.
d. When projects are mutually exclusive, the NPV rule is ignored and neither project is accepted.
ANSWER: b
108. Energy Project Beta has the following cash flows:
CF 0 –$4,000
CF 1 $0
CF 2 $0
CF 3 $1,000
CF 4 $3,000
CF 5 $7,000
If this project has a required rate of return of 10%, will management accept or reject the project?
NPV @ r =10% = $3,147 (rounded up)

a. Management would reject the project because there are no cash flows greater than zero in years 1 and 2.
b. Management would reject the project because the project has a NPV of $8,000.
c. Management would reject the project because the project has a NPV of $3,147.
d. Management would reject the project because the project has a NPV of $5,067.
ANSWER: c
109. Project Delta has the following cash flows:
CF 0 –$10,000
CF 1 $0
CF 2 $500
CF 3 $800
CF 4 $3,000
CF 5 $6,000
NPV @ r =15% = –$4,398(rounded up)

a. Management would reject the project since there are no cash flows greater than zero in year 1.
b. Management would reject the project because the project has a NPV of $4,398.
c. Management would reject the project because the project has a NPV of –$4,398.
d. Management would reject the project because the project has a NPV of –$10,000.
ANSWER: c
CF 0 –$1,000,000
CF 1 $100,000
CF 2 $500,000
CF 3 $500,000
CF 4 $30,000
NPV @ r =22% = –$293,206 (rounded up)

a. Management would reject the project because the project has a NPV of $234,398.
b. Management would reject the project because the project has a NPV of –$293,206.
c. Management would reject the project because the project has a NPV of $293,206.
d. Management would reject the project because the project has a NPV of –$649,550.
ANSWER: b
CF 0 –$1,000,000
CF 1 $100,000
CF 2 $500,000
CF 3 $500,000
CF 4 $30,000
Calculate the project’s IRR given a required rate of return of 22%.
NPV @ r =22% = –$293,206 (rounded up)

IRR = 5.24% (rounded up)
a. IRR = 22.00%
b. IRR = 5.24%
c. IRR = 10.56%
d. IRR = –5.24%
ANSWER: b
112. In general, where there is a conflict between two mutually exclusive projects, the NPV of a project and its internal
rate of return, in terms of making a go/no go decision, the conflict is resolved by which of the following rules?
a. Where the NPV method chooses one project but the IRR method chooses the other, the conflict should
generally be resolved in favour of the project with the higher NPV.
b. Where the NPV method chooses one project but the IRR method chooses the other, the conflict should
generally be resolved in favour of the project with the higher IRR.
c. Where the NPV method chooses one project but the IRR method chooses the other, the conflict should
generally be resolved in favour of the project with the higher accounting net income.
d. Where the NPV method chooses one project but the IRR method chooses the other, the conflict should
generally be resolved in favour of the project with the lower NPV.
ANSWER: a
113. Which of the following is correct regarding a change in a project’s cost of capital and its IRR?
a. Other things held constant, an increase in the cost of capital will result in an increase in a project’s IRR.
b.
b. Other things held constant, an decrease in the cost of capital will result in a decrease in a project’s IRR.
c. Other things held constant, an increase in the cost of capital will result in a decrease in a project’s IRR.
d. Other things held constant, an increase in the cost of capital will result in NO CHANGE in a project’s IRR.
ANSWER: d
114. Which of the following is INCORRECT regarding a project’s NPV?

a. If a project’s NPV exceeds its IRR, then the project should be accepted.
b. If a project’s NPV is less than its IRR, then the project should be accepted.
c. If a project’s NPV exceeds its IRR, then the project should be rejected
d. If a project’s NPV is greater than zero, the project should be accepted.
ANSWER: d
115. Which of the following is true regarding the payback method?

a. One advantage of the payback method for evaluating potential investments is that it provides some
information about a project’s liquidity and risk.
b. One advantage of the payback method for evaluating potential investments is that it provides the total profit to
be earned from a project.
c. One advantage of the payback method for evaluating potential investments is that it provides some
information about a project’s risk and cash flow from equity.
d. One advantage of the payback method for evaluating potential investments is that it provides some
information about a project’s liquidity and its IRR profile.
ANSWER: a
116. Which of the following is true regarding projects with non-normal cash flows?
a. A project has non-normal cash flows when all of the cash flows have positive signs after the initial cash flow.
b. A project has non-normal cash flows when all of the cash flows have negative signs.
c. A project has non-normal cash flows when all of the cash flows have positive signs after the year 2.
d. A project has non-normal cash flows when the signs of the cash flows change more than once.
ANSWER: d
117. A project has a series of non-normal cash flows that result in a terminal value (TV) of $1,580 in 4 years. If the
project’s initial costs are $1,000, what is your recommendation regarding this project to management (accept/reject)?
a. accept as the MIRR is 12.12%
b. reject as the MIRR is greater than zero
c. accept as the terminal value is greater than the present value of the costs
d. accept as the MIRR is 22.50%
ANSWER: a
ANSWER: a
a. accept as the MIRR is 20%
ANSWER: d
120. Which of the following is correct regarding profitability indices (PI)?

a. The higher the PI, the lower the ranking.
b. The lower the PI, the lower the ranking.
c. A project with a PI above 1.0 should be accepted.
d. Both B and C are correct regarding profitability indices.
ANSWER: d
121. A project has the following cash flows:
CF 0 –1,000
CF 1 $500
CF 2 $400
CF 3 $300
CF 4 $100
Assuming a required rate of return of 10% what is this project’s PI?
NPV @ r = 10% = $1,078

PV (Costs) = $1,000
PI = $1,078 / $1,000 = 1.078 = 1.08
a. 1.58
b. 1.08
c. 1.00
d. 1.33
ANSWER: d
CF 0 –10,000
CF 1 $1,500
CF 2 $4,400
CF 3 $5,000
CF 4 $3,800
Assuming a required rate of return of 15%, would management accept this project?
NPV @ r = 15% = $10,092 (rounded up)

PV (Costs) = $10,000
PI = $10,092 / $10,000 = 1.009
a. 1.01
b. 1.10
c. 1.20
d. 1.33
ANSWER: a
CF 0 –10,000
CF 1 $1,500
CF 2 $4,400
CF 3 $8,000
CF 4 $8,800
Assuming a required rate of return of 6%, would management accept this project?
NPV @ r = 6% = $19,019 (rounded up)

PV (Costs) = $10,000
PI = $19,019 / $10,000 = 1.90
a. 1.01
b. 1.90
c. 1.20
d. 1.33
ANSWER: b
124. As of 2011, which method of capital budgeting was preferred in Canada?

a. payback period
b. IRR
c. NPV
d. accounting rate of return
ANSWER: c
project’s initial costs are $1,000, what is your recommendation to management regarding this project (accept/reject)?
ANSWER: a
project’s initial costs are $33,000, what is your recommendation to management regarding this project (accept/reject)?
a. accept as the MIRR is 29.50
ANSWER: a
a. accept as the MIRR is 12%
ANSWER: d
Another random document with
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Mr. Gentle. If it were proper to deprive the animal of life, it would
be a duty to do it in as expeditious a manner as possible, and very
wicked to torment the poor creature; but the accusation is false, and
you are unjust as well as cruel.—Release it this instant!
William. Will the hedge-hog be glad when he gets loose?
Grandfather. Very glad.
William. Then I shall be glad too.
Grandfather. I hope that you will always delight in making other
creatures happy: and then you will be happy yourself.
William. I love to see the dog happy, and the cat happy.
Grandfather. Yes, surely; and you love to make them happy.
William. How can I make them happy?
Grandfather. By giving them what they want, and by taking kind
notice of them, and when you get on Cæsar’s back again, as he lets
you ride, do not strike him, but coax him gently.
William. Can I make my brothers and sisters happy?
Grandfather. You can each of you make yourself and all the rest of
the children happy, by being kind and good-humored to each other;
willing to oblige, and glad to see the others pleased.
William. How, pray?
Grandfather. If you were playing with a toy, and Bartle wished to
have it, perhaps you would part from it to please him; if you did, you
would oblige him.
William. Should not I want it myself?
Grandfather. You would be pleased to see him delighted with it,
and he would love you the better, and when George goes out, and
you stay at home, if you love him as well as you do yourself, you will
be happy to see his joy.
William. I shall be happy to see his joy.
Grandfather. Your parents are always watching over you all, for
your good; in order to correct what is amiss in your tempers, and
teach you how you ought to behave; they will rejoice to see you fond
of each other, and will love you all the better.
William. Grandpa, I remember that my brother wrote a piece last
Christmas, which you called Brotherly Love.—I wish I could
remember it.
Grandfather. I recollect it;—you shall learn to repeat it.
William. I shall like that; pray let me hear it now, sir.
Grandfather. You shall.
“The children of our family should be like the fingers on a hand;
each help the other, and each in his separate station promote the
good of the whole. The joy of one should be the joy of the whole.
Children in a house should agree together like the birds in a nest,
and love each other.”
William. I thank you grandpa: I remember Watts’ hymn:
“Birds in their little nests agree,

“And ’tis a shameful sight,
“When children of one family,
“Fall out and chide and fight.”
The master Rebels often fight; many say that it is jealousy that
makes them do so.—Pray, grandpa, what is jealousy?
Grandfather. A passion which I hope will never enter your breast.
Your excellent parents love you all equally, and take care to make it
appear that they do so. A good parent looks around with equal love
on each child, if all be equally good, and each be kind to the rest.
When a family is affectionate, how happy is every member of it! each
rejoiceth at the happiness of the rest, and so multiplies his own
satisfactions. Is any one distressed? the tender and compassionate
assistance of the rest mitigates where it cannot wholly relieve his
pain!
“Our joys when thus shared are always increas’d,
“And griefs when divided are hushed into peace.”
THE USEFUL PLAY.
First Girl. Let us lay words. Where is the box?

Second Girl. How do you play?
First Girl. I will show you. Here I give you c, e, u, h, q, and n; now
place them so as to make a word.
Second Girl. It is quench!
First Girl. You are quick; now let us pick out some words for
Charles. What shall we choose?
Second Girl.
Let us lay thrust, thresh, branch,
ground, school, thirst, quince, quail,
and dearth.
First Girl.
I will lay plague, and neigh, and
nought, and naught, and weight, and
glare, and freight, and heart, and
grieve, and hearth, and bathe, and
thread, and vaunt, and boast, and
vault, and tongue, and grieve, and
beard, and feast, and friend, and
fraught, and peace, and bread, and
grape, and breath, or the verb to
breathe, and thought, and grace, and
mouse, and slave, and chide, and
stake, and bought.
Second Girl. I shall like the play, and it will teach Charles to spell
well.
First Girl. That is its use: we have sports of all kinds to make us
quick: we have some to teach us to count; else I could not have
been taught to do sums at three years old.
Second Girl. Were you?
First Girl. Yes; I was through the four rules by the time that most
boys learn that two and two make four.
Second Girl. I wish you would teach me some of your sports; that I
could teach Charles.
First Girl. Print words on a card; on the back write the parts of
speech; let it be a sport for him to try if he can find what each one is;
let him have the words, and place them so as to make sense; thus I
give you these words:
you, done, do, be, would, by, as.
Place them in their right order, and make
Do as you would be done by.
Or give him two or three lines: here and there scratch out a word;
let him tell what those words must be to make sense.
Second Girl. The card on which you have a, b, c, and so on, might
have a, b, c, made with a pen at their backs, to teach written hand.
First Girl. I have a set of those; I could read my mother’s writing
when I was four years old.
Second Girl. I will buy some prints or cuts, and paste at the back
of cards, for our little ones; so they will soon learn to distinguish
nouns. On one side shall be dog; I will ask what part of speech is
that? Charles will say, Is it not a noun?—He will turn the card, and
find a cut.
First Girl. Let us prepare some words of all kinds; we can lay
sentences for little ones to read. For Lydia, we will place them thus:
Our new dog.

An old cat.
My mother says that three words are as much as a child could
read in a breath at first.
Second Girl. Where there is a house full of young folks, it might be
good sport to teach and learn in these ways.
First Girl. It is; we play with our words thus; mother gives to one
some words; he is to place them so as to make sense: one is to
parse them: one to tell more than the parts of speech, as the tense,
mode and so on, of the verbs.—George and I have false English to
correct; verse to turn to prose; we write out a passage which we like;
we write letters upon given subjects; we read a story, and then write
it in our own words.
Second Girl. Do you repeat much?
First Girl. To strengthen our memories, we learn to repeat
passages in prose—we also repeat verse, and read it aloud.
Second Girl. That is a great pleasure.
First Girl. Yes, and my mother reads aloud to us; this teaches us to
read with propriety; and she often stops to inquire whether we
understand any expression which is not perfectly plain.
THE END.
Transcriber’s Notes
pg 18 Changed: Bo as you are bid

to: Do as you are bid
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24. Theoretically speaking, hard capital rationing does not exist.

26. Which statement regarding the IRR method is correct?

29. Which statement regarding normal cash flows is correct?

30. Which statement regarding normal cash flows is correct?

33. Which statement regarding payback is true?

35. Which of the following statements is correct?

36. Which statement about an NPV profile graph is true?

37. Which statement about the NPV is true?

39. Which of the following statements is correct?

Which of the following statements is correct?

45. Which statement about multiple IRRs is true?

47. Which of the following statements is correct?

48. Which of the following statements is correct?

49. Which of the following statements is correct?

50. Which of the following statements is correct?

51. Which of the following statements is correct?

52. Which of the following statements is correct?

79. ZumBahlen Inc. is considering the following mutually exclusive projects:

New WACC: 8.00% Old WACC: 11.00%

New WACC: 7.00% Old WACC: 10.00%

Year Cash Flow

105. Which if the following is best description of the IRR?

108. Energy Project Beta has the following cash flows:

NPV @ r =10% = $3,147 (rounded up)

109. Project Delta has the following cash flows:

NPV @ r =15% = –$4,398(rounded up)

110. Project Delta has the following cash flows:

NPV @ r =22% = –$293,206 (rounded up)

111. Project Delta has the following cash flows:

Calculate the project’s IRR given a required rate of return of 22%.

NPV @ r =22% = –$293,206 (rounded up)

114. Which of the following is INCORRECT regarding a project’s NPV?

115. Which of the following is true regarding the payback method?

120. Which of the following is correct regarding profitability indices (PI)?

121. A project has the following cash flows:

Assuming a required rate of return of 10% what is this project’s PI?

NPV @ r = 10% = $1,078

122. A project has the following cash flows:

NPV @ r = 15% = $10,092 (rounded up)

123. A project has the following cash flows:

NPV @ r = 6% = $19,019 (rounded up)

124. As of 2011, which method of capital budgeting was preferred in Canada?

“Birds in their little nests agree,

First Girl. Let us lay words. Where is the box?

Our new dog.

pg 18 Changed: Bo as you are bid

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