If a capital project has a hurdle rate higher than its internal rate, then its profitability index is O Less than zero Higher than the cost of capital O Less than one O Higher than the net present value

If a capital project has a hurdle rate higher than its internal rate, then its profitability index is O Less than zero Higher than the cost of capital O Less than one O Higher than the net present value

Managerial Accounting: The Cornerstone of Business Decision-Making

7th Edition

ISBN:9781337115773

Author:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Publisher:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Chapter12: Capital Investment Decisions

Section: Chapter Questions

Problem 16MCQ: Using IRR, a project is rejected if the IRR a. is equal to the required rate of return. b. is less...

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Production Budget

A budget can be defined as a financial plan designed by an undertaking for a definite period in the future that can contribute towards enhancing the financial success of the business undertaking. It is used to estimate the revenue and expenses. The budget generally takes into account both current and future income and expenses.

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Using IRR, a project is rejected if the IRR a. is equal to the required rate of return. b. is less than the required rate of return. c. is greater than the cost of capital. d. is greater than the required rate of return. e. produces an NPV equal to zero.
Using NPV, a project is rejected if it is a. equal to zero. b. negative. c. positive. d. equal to the required rate of return. e. greater than the cost of capital.
If a net present value analysis for a normal project gives an NPV greater than zero, an internal rate of return calculation on the same project would yield an internal rate of return ____ the firm's cost of capital.a. greater thanb. less thanc. equal tod. cannot be determined from the information given
The general rule for using the weighted-average cost of capital (WACC) in capital budgeting decisions is to accept projects with: Select one: A. Expected rates of return that are positive B. Expected rates of return less than the WACC C. Expected rates of return greater than the WACC D. Actually, expected rates of return can be ignored
For a capital investment project to be acceptable, it must generate a rate of return A) Less than the required rate of returnB) Equal to or greater than the cost of capitalC) equal to the initial investmentD) none of the above
For a capital investment project to be acceptable, it must generate a rate of return: O Less than the required rate of return. O Equal to or greater than the cost of capital. 4 O Equal to the initial investment. none of the above answers are correct.
project is accepted if, Net present value of the project is positive. IRR is lower than cost of capital. Modified internal rate of return is greater than cost of capital. Profitability index is greater than 1. I) II) III) IV) V) Payback period is lower than the acceptable payback period. Which of the above statements are correct? A. I, II and II. B. I and IV C. I, III, IV, and V D. All of the above.
Which of the following statements is true about the internal rate of return? a. It is the interest rate that sets a project's net present value at zero. b. It is the minimal acceptable interest rate on an investment. c. It is the difference between the present value of the cash inflows and outflows associated with a project. d. It is the difference between the present value of a cash outflow and the depreciation associated with an asset.
Consider the relationship between a project’s net present value (NPV), its internal rate of return (IRR), and a company’s cost of capital. For each scenario that follows, indicate the relative value of the unknown. If cost of capital is unknown, indicate whether it would be higher or lower than the stated IRR. If NPV is unknown, indicate whether it would be higher or lower than zero. Project 1 is shown as an example.
Which of the following is not a capital budgeting technique? Select one: a. Net present value b. Discounted Payback period c. Payback Period d. Profitability index e. Ratio Analysis Which capital budgeting projects are preferred? Select one: a. Lower payback period b. None of the option c. Higher payback period d. Lower cash inflow projects e. Average payback period
In capital budgeting, a project is accepted only if the internal rate of return equals or: a. exceeds the net present value b. is less than the required rate of return c. exceeds the required rate of return d. exceeds the accrual accounting rate of return
True or False: In solving a capital budgeting problem involving investment opportunities that are divisible (i.e., you can invest in portions of the opportunities instead of “all or nothing”), you rank the opportunities on thebasis of internal rate of return and add to the portfolio opportunities andfractions of opportunities, beginning with the largest internal rate of return,until “the investment bucket is filled.”