Question

1. MIRR fixes all of the issues with the IRR except: a) The multiple IRR problem b) The issue of scale c) NPV d) None of the above 2. 2. The NPV of Depreciation tax shields will be if depreciation is calculated using the Modified Accelerated Cost Recovery System (MACRS) vs. straight line depreciation (assume the interest rate is positive, if it matters). a) larger b) smaller c) the same d) unknown 3. Depreciation reduces our taxable income because... a) The government lets us deduct depreciation when calculating our Taxable income b) Depreciation is a cash expense c) Depreciation is awesome d) None of the above 4. When performing DCF analysis we do not consider sources of financing (loans, sale of stock) because: a) The NPV of financing activities should be zero b) Figuring out the effects of financing activities is someone else's job c) The NPV of financing activities is always positive, so if the NPV of the project is positive, we know we've created value including financing effects d) None of the above 5. For ALL potential projects, if the required return were to suddenly increase, then the NPV would A SHOT AT REDEMPTION!!! a) Definitely decrease b) Definitely increase c) Maybe increase, maybe decrease d) None of the above

Answer 1

1) B

2) A

3) A

4) D

5) A

6) D

7) A

8) A

9) D

10) NIL

All the questions have been answered just to assist student.