The ________ is/are critical to business decisions, business growth, and ultimately business success. A) risk and timing but not the amount of cash flow B) currency denomination of profits C) risk and profits but not the amount of cash flow D) timing and amount of cash flow ANSWER Answer: D
Date: September 19th, 2020
Information asymmetry is chief among violations of which of the assumptions of an ideal capital market? a. Capital Markets are frictionless b. Homogeneous expectations c. Atomistic competition d. The firm has a fixed investment program e. Once chosen, the firm’s financing is fixed ANSWER B
Date: September 19th, 2020
The ________ method is economically sound and properly ranks projects across various sizes, time horizons, and levels of risk, without exception for all independent projects. A) NPV B) Discounted Payback Period C) Profitability Index D) Modified IRR ANSWER Answer: A
Date: September 19th, 2020
Business risk is the risk to a firm of being unable to cover operating costs. Indicate whether the statement is true or false ANSWER TRUE
Date: September 19th, 2020
The ________ model provides a single measure (return) but must apply risk outside the model, thus allowing for errors in rankings of projects. A) Payback Period B) IRR C) Net Present Value D) Profitability Index ANSWER Answer: B
Date: September 19th, 2020
________ corrects for most, but not all, of the problems of IRR and gives the solution in terms of a return. A) Profitability Index B) Discounted Payback Period C) Net Present Value D) MIRR ANSWER Answer: D
Date: September 19th, 2020
Lenders recognize that by having an interest in collateral they can reduce losses if the borrowing firm defaults, ________. A) and the presence of collateral reduces the risk of default B) but the presence of collateral has no impact on the risk of default C) therefore lenders prefer to lend to customers from whom they […]
Date: September 19th, 2020
According to an academic survey of large and small U.S. businesses, the IRR method of capital budgeting is slightly preferred over NPV by the survey respondents. Indicate whether the statement is true or false. ANSWER Answer: TRUE
Date: September 19th, 2020
The discounted payback method, net present value method (NPV), internal rate of return (IRR), modified internal rate of return (MIRR), and profitability index (PI) are all consistent with the time value of money. Indicate whether the statement is true or false. ANSWER Answer: TRUE Explanation: The IRR method is used by 75.61% of […]
Date: September 19th, 2020
Calculating IRR, NPV, or MIRR is easy and efficient using a spreadsheet once you know the relevant cash flow, the timing of the cash flow, the cost of capital, and the reinvestment rate. Indicate whether the statement is true or false. ANSWER Answer: TRUE
Date: September 19th, 2020
