The hurdle rate should be set so that it reflects the proper risk level for the project. If we have to choose between two projects with similar risk and therefore similar hurdle rates, we would select the project that ________. A) has a higher internal rate of return B) has a lower internal rate of […]
Date: September 19th, 2020
Lenders of secured short-term funds prefer collateral ________. A) as it reduces the risk of default B) that are liquid assets C) to reduce the losses if the borrower defaults D) so that they can charge a higher interest rate ANSWER C
Date: September 19th, 2020
Without a computer and special calculator, ________. A) computing the payback period is much more difficult than computing the IRR B) finding the IRR will typically be a very easy process C) finding the IRR may be a very tedious process only if the NPV is negative D) finding the IRR may be a very […]
Date: September 19th, 2020
Flynn, Inc. is considering a four-year project that has an initial outlay or cost of $80,000. The future cash inflows from its project are $40,000, $40,000, $30,000, and $30,000 for years 1, 2, 3 and 4, respectively. Flynn uses the internal rate of return method to evaluate projects. What is the approximate IRR for this […]
Date: September 19th, 2020
The IRR is the discount rate that produces a zero NPV or the specific discount rate at which the present value of the cost equals ________. A) the future value of the present cash outflows B) the present value of the future benefits or cash inflows C) the present value of the cash outflow D) […]
Date: September 19th, 2020
Until now, Delaware East, Inc has been an all-equity firm; its most recent market equity value was $80 mn., and its cost of equity (and cost of assets) is 15%. Now, the firm decides to increase its leverage by issuing $40 mn. in debt, with the proceeds being used to pay a dividend to shareholders. […]
Date: September 19th, 2020
Due to its secondary position relative to equity, suppliers of debt capital face greater risk and therefore must be compensated with higher expected returns than suppliers of equity capital. Indicate whether the statement is true or false ANSWER FALSE
Date: September 19th, 2020
Rogue River, Inc. is considering a project that has an initial outlay or cost of $220,000. The respective future cash inflows from its four-year project for years 1 through 4 are: $50,000, $60,000, $70,000, and $80,000, respectively. Rogue River uses the internal rate of return method to evaluate projects. Will Rogue River accept the project […]
Date: September 19th, 2020
Simpson, Inc. is considering a five-year project that has an initial outlay or cost of $80,000. The respective future cash inflows from its project for years 1, 2, 3, 4 and 5 are: $15,000, $25,000, $35,000, $45,000, and $55,000. Simpson uses the internal rate of return method to evaluate projects. What is the project’s IRR? […]
Date: September 19th, 2020
Meyer, Inc. is considering a very risky five-year project that has an initial outlay or cost of $70,000. The future cash inflows from its project for years 1, 2, 3, 4, and 5 are all the same at $35,000. Meyer uses the internal rate of return method to evaluate projects. Will Meyer accept the project […]
Date: September 19th, 2020
