FIN 571 Connect Problems - UOP E Tutors

FIN 571 Connect
Problems
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FIN 571 Week 5 Connect Problems -

1. The difference between the present value of an
investment?s future cash flows and its initial
cost is the:
net present value.
internal rate of return.
payback period.
profitability index.
discounted payback period
2. Which statement concerning the net present
value (NPV) of an investment or a financing
project is correct?
A financing project should be accepted if, and
only if, the NPV is exactly equal to zero.
An investment project should be accepted only if
the NPV is equal to the initial cash flow.
Any type of project should be accepted if the
NPV is positive and rejected if it is negative.

Any type of project with greater total cash
inflows than total cash outflows, should always
be accepted.
An investment project that has positive cash
flows for every time period after the initial
investment should be accepted.
3. The primary reason that company projects
with positive net present values are
considered acceptable is that:
they create value for the owners of the firm.
the project's rate of return exceeds the rate of
inflation.
they return the initial cash outlay within three
years or less.
the required cash inflows exceed the actual cash
inflows.
the investment's cost exceeds the present value
of the cash inflows.

4. Accepting a positive net present value (NPV)
project:
indicates the project will pay back within the
required period of time.
means the present value of the expected cash
flows is equal to the project’s cost.
ignores the inherent risks within the project.
guarantees all cash flow assumptions will be
realized.
is expected to increase the stockholders’ value
by the amount of the NPV.
5. The net present value method of capital
budgeting analysis does all of the following
except:
incorporate risk into the analysis.
consider all relevant cash flow information.
use all of a project's cash flows.
discount all future cash flows.
provide a specific anticipated rate of return.

6. What is the net present value of a project
with an initial cost of $36,900 and cash
inflows of $13,400, $21,600, and $10,000 for
Years 1 to 3, respectively? The discount rate
is 13 percent.
−$287.22
−$1,195.12
−$1,350.49
$204.36
$797.22
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