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Question
When a project's internal rate of return equals its opportunity cost of capital, then the:
A. project should be rejected.
B. project has no cash inflows.
C. net present value will be positive.
D. net present value will be zero.
Answer
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Related questions
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Q:
The opportunity cost of capital:
A. is the interest rate that the firm pays on a loan from a financial institution.
B. is the maximum acceptable rate of return on a project.
C. is the minimum acceptable rate of return on a project.
D. is always less than 10%.
Q:
Excess cash held by a firm should be:
A. reinvested by the firm in projects offering the highest rate of return.
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C. reinvested by the firm in the financial markets.
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Q:
A capital investment that generates a 10% rate of return is worthwhile if:
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B. corporate bonds of similar risk offer 11% rates of return.
C. top-quality corporate bonds offer 10% rates of return.
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Q:
Which mutually exclusive project would you select, if both are priced at $1,000 and your required return is 15%: Project A with three annual cash flows of $1,000; or Project B, with 3 years of zero cash flow followed by 3 years of $1,500 annually?
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Q:
What is the NPV for the following project cash flows at a discount rate of 15%? C0 = ($1,000), C1 = $700, C2 = $700.
A. ($308.70)
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Q:
The internal rate of return is most reliable when evaluating:
A. a single project with alternating cash inflows and outflows over several years.
B. mutually exclusive projects of differing sizes.
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Q:
The modified internal rate of return can be used to correct for:
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Q:
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A risky dollar is worth more than a safe one.
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Both the NPV and the internal rate of return methods recognize that the timing of cash flows affects project value.
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When using a profitability index to select projects, a value of .63 is preferred over a value of 0.21.
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If the dividend yield for year 1 is expected to be 5% based on a stock price of $25, what will the year 4 dividend be if dividends grow annually at a constant rate of 6%?
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A. $24.30
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Q:
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A. remain unchanged because they already reflect this information.
B. accurately and rapidly adjust to include this new information.
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