Using the NPV as decision rule for investment purposes

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Reference no: EM132033927

1) Using the NPV as a decision rule for investment purposes takes into account the following considerations:

A. Changing benefit streams.

B. Changing levels of risk.

C. Time value of money

D. All of the above.

2) Which of the following would have the largest present value? $5,000 discounted at 12.5% with ________ discounting.

A. annual.

B. quarterly.

C. monthly.

D. weekly.

3) The difference between the NPV and PV stems from

A. a difference in discount rate.

B. the fact that the NPV includes the Terminal Value.

C. the fact that the IRR is the discount rate that sets NPV = 0.

D. the fact that the NPV includes the Initial Investment.

4) Assume that your required rate of return is 12 percent and you are given the following stream of cash flows:

Year Cash Flow

0 $10,000

1 $15,000

2 $15,000

3 $15,000

4 $15,000

5 $20,000

If payments are made at the end of each period, what is the present value of the cash flow stream?

A. $66,909

B. $57,323

C. $61,815

D. $52,345

5) The present value (t = 0) of the following cash flow stream is $5,979.04 when discounted at 12 percent annually. What is the value of the missing (t = 2) cash flow?

0 1 2 3 4 Periods

|--------|--------|--------|---------|

0 1,000 ? 2,000 2,000

A. $2,000

B. $2,391

C. $3,000

D. $3,391

Reference no: EM132033927

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