Capital Budgeting Techniques

Internal Rate of Return results in an NPV of......

• Zero

• One

• Ten

• One hundred

IRR is measured in......

• dollar value

• percentage return

• centimeters

• Pounds

− + + + + − or − + + + − + + +. This cash flow is normal.

• True

• False

If NPV ... zero, accept the project

• =

• >

• <

• >=

(NPV), defined as the present value of a project’s cash inflows minus the present value of its costs

• True

• False

With regard to NPV profiles, the point at which a profile crosses the vertical axis is best described

• the point at which two projects have the same NPV.

• the sum of the undiscounted cash flows from a project.

• a project's internal rate of return when the project's NPV is equal to zero

When the IRR is equal to the discount rate, the NPV is:

• positive.

• cannot be determined without knowing the discount rate.

• equal to zero.

• negative.

What is the formula of Present value index?

• PV / Initial Cost

• Initial Cost / PV

• PV / Initial Cost * 100%

• (PV + Initial Cost)/2

The project is accepted if its PVI greater than 0.1

• True

• False

If the PVI ranking conflicts with the NPV, then the ______ ranking should be used.

• NPV

• IRR

• PVI

• All are the same