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- Date Submitted: 09/30/2014 7:58 AM
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BUSN 379 Final Exam 100% Correct Answers

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BUSN 379 Final Exam 100% Correct Answers

1. (TCO 4) Which of the following is true regarding the evaluation of projects? (Points : 4)

sunk costs should be included

erosion effects should not be considered

financing costs need to be included

opportunity costs are relevant

2. (TCO 4) Which of the following investment ranking methods does not consider the time value of money? (Points : 4)

net present value method

payback method

internal rate of return method

all of these are time-adjusted methods

3. (TCO 3 and 4) A net present value of zero implies that an investment: (Points : 4)

has no initial cost.

has an expected return that is less than the required return.

should be rejected even if the discount rate is lowered.

never pays back its initial cost.

is earning a return that exactly matches the requirement.

4. (TCO 3 and 4) What is the net present value of a project with the following cash flows, if the discount rate is 15 percent?

Year

0

1

2

3

4

Cash flow

-$45,000

$11,520

$13,630

$16,470

$18,990

(Points : 4)

-$2,989.48

-$2,599.55

$1,153.37

$2,880.08

$3,312.09

5. (TCO 4) Leward Manufacturing is spending $115,000 to update its equipment. This is necessary if the firm wishes to be competitive in the marketplace and provide a wide array of product models. The company estimates that these updates will improve its cash inflows by $27,500 a year, for eight years. What is the payback period? (Points : 4)

4.18 years

5.82 years

6.62 years

7.79 years

This project never pays back

6. (TCO 4) The postponement of a project until conditions are more favorable: (Points : 4)

is a valuable option.

is referred to as the option to extend.

could not cause a negative net present value project to become a positive net present...

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