Homework Answers
FALSE
Projects with profitability index of more than 1 should be accepted as same indicates that it is a good investment.
Since , profitability index = present value of future cash flows/ initial investment.
Therefore for good investment, numerator should be greater than denominator which implies it should be greater than 1
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All projects with a profitability index of less than 1 should be accepted. True or False...
An independent project should be accepted if it produces a net present value that is less...
An independent project should be accepted if it produces a net present value that is less than zero. has an IRR greater than the required rate of return. has an IRR greater than zero. produces a profitability index greater than or equal to zero.
All the mutually exclusive projects need to be ranked with only the best project accepted. True...
All the mutually exclusive projects need to be ranked with only the best project accepted. True False true correct?
A project should be accepted when the: Select one: a. Payback period is greater than the...
A project should be accepted when the: Select one: a. Payback period is greater than the prescribed number of years. O b. IRR exceeds the required rate. O c. Net present value is negative. O d. AAR is less than the targeted AAR. Oe. Profitability index is less than 1.0.
Select all that are true, if p < .05 1.) the null hypothesis should be accepted...
Select all that are true, if p < .05 1.) the null hypothesis should be accepted 2.)the test results are significant 3.) the results are not likely due to random chance 4.) the null hypothesis should be rejected 5.) you would expect to find results more extreme less than 5 times out of 100
1(a). (TRUE or FALSE?) If projects A & B are mutually exclusive and their NPVs are...
1(a). (TRUE or FALSE?) If projects A & B are mutually exclusive and their NPVs are less than zero, accept both projects. 1(b). (TRUE or FALSE?) Internal rate of return method shows how many years take to recoup the initial investment. 1(c). (TRUE or FALSE?) Any time you consider investing in a project, you will not actually receive the IRR unless you can reinvest the project’s intervening cash flows at the IRR.
Net present value: is the best method of analyzing mutually exclusive projects. is less useful than...
Net present value: is the best method of analyzing mutually exclusive projects. is less useful than the internal rate of return when comparing different sized projects. is the easiest method of evaluation for non-financial managers to use. is less useful than the profitability index when comparing mutually exclusive projects. is very similar in its methodology to the average accounting return.
18. Which of the following is NOT true about the internal rate of return: A) A...
18. Which of the following is NOT true about the internal rate of return: A) A good project is one with IRR greater than the required return. B) IRR is the discount rate that results in a zero net present value for the project. C) Crossover rate for two projects is the IRR of the project with the difference of the cash flows of the two projects.. D) For two projects of the same size, IRR will usually choose the...
6. Evaluate the following projects, using the profitability index. Assume a cost of capital of 11%....
6. Evaluate the following projects, using the profitability index. Assume a cost of capital of 11%. Project Al Project B |Initial Cash Outflow - $260,0001-$250,000 Year 1 Cash flow 23,000 160,000 Year 2 Cash flow 127,000 95,000 Year 3 Cash flow | 190,000175,000 Ja. What is the profitability index for each project? b. If the projects are independent, which would you accept according to the profitability index criterion? c. If these projects are mutually exclusive, which would you accept according...
QS 24-10 Profitability index LO P3 Yokam Company is considering two aternative projects. Project requires an...
QS 24-10 Profitability index LO P3 Yokam Company is considering two aternative projects. Project requires an initial Investment of $490,000 and has a present value of cash flows of $2.250.000. Project 2 requires an initial Investment of $4 million and has a present value of cash flows of $7 m lon. 1. Compute the profitability Index for each project. Profitability Index Choose Numerator: Choose Profitability Index Profitability index Project Project 2. Based on the profitability Index, which project should the...
Which one of the following statements is not true regarding the profitability index (PI)
Which one of the following statements is not true regarding the profitability index (PI)? (1) The PI expresses the present value of an investment as a ratio of the initial investment (2) If the present value of future cash flows is less than the initial investment, then the PI will be less than 1. (3) The PI quantities how much a project is expected to earn for every Rl invested in the project. (4) A negative value for Pl is indicative of an unprofitable...
A project should be accepted when the: Select one: a. Payback period is greater than the prescribed number of years. O b. IRR exceeds the required rate. O c. Net present value is negative. O d. AAR is less than the targeted AAR. Oe. Profitability index is less than 1.0.
18. Which of the following is NOT true about the internal rate of return: A) A good project is one with IRR greater than the required return. B) IRR is the discount rate that results in a zero net present value for the project. C) Crossover rate for two projects is the IRR of the project with the difference of the cash flows of the two projects.. D) For two projects of the same size, IRR will usually choose the...
6. Evaluate the following projects, using the profitability index. Assume a cost of capital of 11%. Project Al Project B |Initial Cash Outflow - $260,0001-$250,000 Year 1 Cash flow 23,000 160,000 Year 2 Cash flow 127,000 95,000 Year 3 Cash flow | 190,000175,000 Ja. What is the profitability index for each project? b. If the projects are independent, which would you accept according to the profitability index criterion? c. If these projects are mutually exclusive, which would you accept according...
QS 24-10 Profitability index LO P3 Yokam Company is considering two aternative projects. Project requires an initial Investment of $490,000 and has a present value of cash flows of $2.250.000. Project 2 requires an initial Investment of $4 million and has a present value of cash flows of $7 m lon. 1. Compute the profitability Index for each project. Profitability Index Choose Numerator: Choose Profitability Index Profitability index Project Project 2. Based on the profitability Index, which project should the...
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