An investment is guaranteed to have a unique value of IRR if which of the following is true? a. Alternating positive and negative cash flows b. An initial negative cash flow followed by all positive cash flows and the sum of the positive cash flows is greater than the magnitude of the negative cash flow c. A unique value for ERR d. A positive PW at MARR.

An investment is guaranteed to have a unique value of IRR if which of the following is true? a. Alternating positive and negative cash flows b. An initial negative cash flow followed by all positive cash flows and the sum of the positive cash flows is greater than the magnitude of the negative cash flow c. A unique value for ERR d. A positive PW at MARR.

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter11: Capital Budgeting Decisions

Section: Chapter Questions

Problem 13MC: Which of the following discounts future cash flows to their present value at the expected rate of...

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Which of the following discounts future cash flows to their present value at the expected rate of return, and compares that to the Initial Investment? A. internal rate of return (IRR) method B. net present value (N PV) C. discounted cash flow model D. future value method
This calculation determines profitability or growth potential of an investment, expressed as a percentage, at the point where NPV equals zero A. internal race of return (IRR) method B. net present value (NPV) C. discounted cash flow model D. future value method
All of the following statements regarding NPV are true EXCEPT:a. A positive NPV indicates the present value of the cash flows exceeds the initial investment.b. A negative NPV indicates the present value of the cash flows is less than the initial investment.c. An NPV equal to zero indicates the present value of the cash flows is equal to the initial investment.d. The internal rate of return is the discount rate that causes the initial investment to exceed the present value of the cash flows.
Consider the calculation of an external rate of return (ERR). The positive cash flows in the cash flow profile are moved forward to t = n using what value of i in the (F|P,i,n–t) factors? a. 0 b. The unknown value of ERR (i′) c. MARR d. IRR.
Which of the following statements is true? Multiple Choice When NPV is 0, the IRR is equal to the discount rate. When NPV is 0, the investment is not making a profit. In calculating IRR, we make the assumption all cash flows are reinvested at the discount rate. NPV is a good measure to use when comparing investments of different sizes.
When using the NPV method for a particular investsment decision, if the present value of all cash inflows is greater than the present value of all cash outflows, then ________. Group of answer choices A. the discount rate used was too high B. the investment provides an actual rate of return greater than the discount rate C. the investment provides an actual rate of return equal to the discount rate D. the discount rate is too low
An investment with a positive total cash flow will always outperform an investment that shows negative cash flow in the first years of operation. A. True B. False
The net present value: is equal to the initial investment when the internal rate of return is equal to the required return. is unaffected by the timing of an investment's cash flows. ignores cash flows that are distant in the future. decreases as the required rate of return increases.
If the sum of the incremental cash flows is negative, what is known about the rate of return on the incremental investment?
The rate of return that equates the present value of cash inflows and outflows is the: A. hurdle rate.B. desired rate of return.C. internal rate of return. D. minimum rate of return.
The ____ of an investment is the period of time for the ____ to equal the initial cash outlay. a. profitability index; present value of the cash inflows b. payback period; cumulative cash inflows c. payback period; present value of the cash inflows d. None of these are correct
Differences between the ERR and the IRR include the following: a. The ERR will yield a unique solution (no multiple rates of return as in the IRR) b. In the ERR, funds recovered from the investment are assumed to earn returns equal to the MARR c. The ERR is always a value somewhere between the IRR and the MARR d. All of the above.