Capital Budgeting

Which of the following projects has the shortest payback period?

• B

• A

Which of the following projects has the highest IRR?

• B

• A

Which of the following projects has the highest NPV?

• A

• B

If you are responsible for maximizing shareholder value and have to choose between project A and B, which project should you choose?

• A

• B

You have 120 capital to be allocated among the 5 projects. If you pick projects with the highest NPV first, the maximum NPV you can achieve is:

• 16

• 21

• 19

• 14

You have 120 capital to be allocated among the 5 projects. If you pick projects that have the highest impact first, the maximum NPV you can achieve is:

• 17

• 16

• 21

• 19

Which of the following businesses would the simple payback period method be most appropriate?

• Restaurant
• Software developer
• Digital marketing agency
• Waste recycling facility

Which of the following statements best describes the IRR?

• The rate of return on the investment calculated based on cash inflows and outflows.
• The rate of return on the investment calculated based on investment capital and profit generated.

• The minimum rate of return required for the business to be profitable.
• The maximum rate of return that the business could generate.

[HARD] Based on the information provided, what are the economic value added in year 1, 2 and 3?

• 0.80, 0.33, 0.00

• 2.00, 1.65, 1.44

• 1.00, 0.65, 1.08

• 1.20, 1.32, 1.44

[HARD] Assume that invested capital will grow at 3% forever in the future. The NPV of this investment is closest to:

• 0.98

• 10.00

• 1.13

• 10.98