FIN 215 Exam 3 Questions and Answers Latest
Student name (PLEASE PRINT):_____________________
MULTIPLE CHOICE - Choose the one alternative that best completes the statement
or answers the question.
1) Net present value involves discounting an investment's:
A) assets.
B) future profits.
C) liabilities.
D) costs.
E) future cash flows.
2) The payback period is the length of time it takes an investment to generate sufficient
cash flows to enable the project to:
A) produce a positive annual cash flow.
B) produce a positive cash flow from assets.
C) offset its fixed expenses.
D) offset its total expenses.
E) recoup its initial cost.
3) The average net income of a project divided by the project's average book value is
referred to as the project's:
Version 1 1
,FIN 215 Take Home Exam 3
A) required return.
B) market rate of return.
C) internal rate of return.
D) average accounting return.
E) discounted rate of return.
4) Both Projects A and B are acceptable as independent projects. However, the selection of
either one of these projects eliminates the option of selecting the other project. Which one of
the following terms best describes the relationship between Project A and Project B?
A) Mutually exclusive
B) Conventional
C) Multiple choice
D) Dual return
E) Crosswise
5) Which one of the following indicates that a project is expected to create value for its
owners?
A) Profitability index less than 1.0
B) Payback period greater than the requirement
C) Positive net present value
D) Positive average accounting rate of return
E) Internal rate of return that is less than the requirement
6) Which one of the following is generally considered to be the best form of analysis if
you have to select a single method to analyze a variety of investment opportunities?
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, FIN 215 Take Home Exam 3
A) Payback
B) Profitability index
C) Accounting rate of return
D) Internal rate of return
E) Net present value
7) Which one of the following indicators offers the best assurance that a project will
produce value for its owners?
A) PI equal to zero
B) Negative rate of return
C) Positive AAR
D) Positive IRR
E) Positive NPV
8) Which one of the following is the primary advantage of payback analysis?
A) Incorporation of the time value of money concept
B) Ease of use
C) Research and development bias
D) Arbitrary cutoff point
E) Long-term bias
9) Which one of the following methods of analysis ignores the time value of money?
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Student name (PLEASE PRINT):_____________________
MULTIPLE CHOICE - Choose the one alternative that best completes the statement
or answers the question.
1) Net present value involves discounting an investment's:
A) assets.
B) future profits.
C) liabilities.
D) costs.
E) future cash flows.
2) The payback period is the length of time it takes an investment to generate sufficient
cash flows to enable the project to:
A) produce a positive annual cash flow.
B) produce a positive cash flow from assets.
C) offset its fixed expenses.
D) offset its total expenses.
E) recoup its initial cost.
3) The average net income of a project divided by the project's average book value is
referred to as the project's:
Version 1 1
,FIN 215 Take Home Exam 3
A) required return.
B) market rate of return.
C) internal rate of return.
D) average accounting return.
E) discounted rate of return.
4) Both Projects A and B are acceptable as independent projects. However, the selection of
either one of these projects eliminates the option of selecting the other project. Which one of
the following terms best describes the relationship between Project A and Project B?
A) Mutually exclusive
B) Conventional
C) Multiple choice
D) Dual return
E) Crosswise
5) Which one of the following indicates that a project is expected to create value for its
owners?
A) Profitability index less than 1.0
B) Payback period greater than the requirement
C) Positive net present value
D) Positive average accounting rate of return
E) Internal rate of return that is less than the requirement
6) Which one of the following is generally considered to be the best form of analysis if
you have to select a single method to analyze a variety of investment opportunities?
Version 1 2
, FIN 215 Take Home Exam 3
A) Payback
B) Profitability index
C) Accounting rate of return
D) Internal rate of return
E) Net present value
7) Which one of the following indicators offers the best assurance that a project will
produce value for its owners?
A) PI equal to zero
B) Negative rate of return
C) Positive AAR
D) Positive IRR
E) Positive NPV
8) Which one of the following is the primary advantage of payback analysis?
A) Incorporation of the time value of money concept
B) Ease of use
C) Research and development bias
D) Arbitrary cutoff point
E) Long-term bias
9) Which one of the following methods of analysis ignores the time value of money?
Version 1 3
