Chapter 9 Net Present Value and Other Investment Criteria

Votes requiredStraight = 28,500/2 + 1
Votes requiredStraight = 14,251

Votes requiredCumulative = 28,500/(2 + 1) + 1
Votes requiredCumulative = 9,501

Difference = 14,251 − 9,501
Difference = 4,750
167) B
Required preferred dividend = 3($1.50)
Required preferred dividend = $4.50
168) D
P0 = $.63/.11
P0 = $5.73
169) B
P0 = $2.71/(.15 − .02)
P0 = $20.85


Student name:
1) A project that costs $21,500 today will generate cash flows of $7,700 per year for seven
years. What is the project's payback period?
1)


A) .36 years
B) 2.79 years
C) 2.33 years
D) 3.00 years
E) 2.23 years

,Question Details
Difficulty : 1 Basic
Topic : Payback
Section : 9.2 The Payback Rule
AACSB : Analytical Thinking
Learning Objective : 09-02 Discuss the payback rule and some of its shortcomings.
Bloom's : Understand




2) Guerilla Radio Broadcasting has a project available with the following cash flows :

Year Cash Flow
0 −$ 16,100
1 6,600
2 7,900
3 4,100
4 3,700

What is the payback period?
2)


A) 2.79 years
B) 3.00 years
C) 1.61 years
D) 2.66 years
E) 2.39 years



Question Details
Difficulty : 1 Basic
Topic : Payback
Section : 9.2 The Payback Rule
AACSB : Analytical Thinking
Learning Objective : 09-02 Discuss the payback rule and some of its shortcomings.
Bloom's : Understand




3) There is a project with the following cash flows :

, Year Cash Flow
0 −$ 24,300
1 7,200
2 7,800
3 7,200
4 5,300

What is the payback period?
3)


A) 4.00 years
B) 3.40 years
C) 3.84 years
D) 2.71 years
E) 3.66 years



Question Details
Difficulty : 1 Basic
Topic : Payback
Section : 9.2 The Payback Rule
AACSB : Analytical Thinking
Learning Objective : 09-02 Discuss the payback rule and some of its shortcomings.
Bloom's : Understand




4) There is a project with the following cash flows :

Year Cash Flow
0 −$ 25,850
1 7,500
2 8,600
3 7,350
4 7,950
5 7,100

What is the payback period?

4)

, A) 3.56 years
B) 3.30 years
C) 3.88 years
D) 2.67 years
E) 4.00 years



Question Details
Difficulty : 1 Basic
Topic : Payback
Section : 9.2 The Payback Rule
AACSB : Analytical Thinking
Learning Objective : 09-02 Discuss the payback rule and some of its shortcomings.
Bloom's : Understand




5) A project with an initial cost of $24,800 is expected to generate cash flows of
$5,900,$8,000, $8,750, $7,650, and $6,700 over each of the next five years, respectively. What is
the project's payback period?
5)


A) 3.75 years
B) 3.65 years
C) 3.39 years
D) 3.28 years
E) 3.49 years



Question Details
Difficulty : 1 Basic
Topic : Payback
Section : 9.2 The Payback Rule
AACSB : Analytical Thinking
Learning Objective : 09-02 Discuss the payback rule and some of its shortcomings.
Bloom's : Understand