Net Present Value of Project A is OMR 35,000 and Net Present Value of Project B is OMR 45,000. In this case, which of the following statement is correct? O a. Project B will be rejected as its Net Present Value is higher than that of Project A O b. Project A will be accepted as its Net Present Value is lower than that of Project B c. None of these O d. Project B will be accepted as its Net Present Value is higher than that of Project A
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- Novak Skateboards is considering building a new plant. Bob Skerritt, the company's marketing manager, is an enthusiastic supporter of the new plant. Lucy Liu, the company's chief financial officer, is not so sure that the plant is a good idea. Currently, the company purchases its skateboards from foreign manufacturers. The following figures were estimated regarding the construction of a new plant. Cost of plant Annual cash inflows Annual cash outflows $3,920,000 3,920,000 3,469,000 Estimated useful life Salvage value Discount rate 15 years $1,960,000 11% Bob Skerritt believes that these figures understate the true potential value of the plant. He suggests that by manufacturing its own skateboards the company will benefit from a "buy American" patriotism that he believes is common among skateboarders. He also notes that the firm has had numerous quality problems with the skateboards manufactured by its suppliers. He suggests that the inconsistent quality has resulted in lost sales,…Which of the following statement is correct Select one: a. A project is accepted when profitability index will be greater than one b. All statements are correct c. A project is accepted when net present value is greater than zero d. A project is accepted when payback period is less than the other projectAn independent capital investment project requires an initial cash outflow at time 0, followed by cash inflows for times 1 to 3. Without knowing any of the figures involved, how will this project be appraised under NPV and IRR? The project will be rejected under NPV, but will be acceptable under IRR The NPV decision will be the same as the IRR decision (i.e. accept or reject the project) The project will be acceptable under NPV, but rejected under IRR The NPV decision will be the opposite of the IRR decision (i.e accept or reject the project)
- Project A has an internal rate of return (IRR) of 15 percent. Project B has an IRR of 14 percent. Both projects have a required return of 12 percent. Which of the following statements is most correct? (Assume the projects are not mutually exclusive.) OA. Both projects have a negative net present value (NPV). OB. Both projects should be accepted because the IRR is greater than the required return. OC. If the required return were less than 12 percent. Project 8 would have a higher IRR than Project A OD. Both projects should be rejected.The following information on two mutually exclusive projects is given below:n Project A Project B0 -3,000 -5,0001 1,350 1,3502 1,800 1,8003 1,500 5,406IRR 25% 25%Which of the following statements is correct?(a) Since the two projects have the same rate of return, they are indifferent.(b) Project A would be a better choice, as the required investment is smaller withthe same rate of return.(c) Project B would be a better choice as long as the investor’s MARR is lessthan 25%.(d) Project B is a better choice regardless of the investor’s MARRNow assume that the equipment’s residual valuecould be as low as $0 or as high as $400,000,but $200,000 is the expected value. Because theresidual value is riskier than the other relevantcash flows, this differential risk should be incorporated into the analysis. Describe how this couldbe accomplished. (No calculations are necessary,but explain how you would modify the analysisif calculations were required.) What effect wouldthe residual value’s increased uncertainty have onLewis’s lease-versus-purchase decision?
- Which of the following is CORRECT? Select one: a. If the NPV of a project is negative, the IRR for the project must also be negative. b. A project's MIRR can never exceed its IRR. c. If a project with normal cash flows has an IRR less than WACC, the project must have a positive NPV. d. If Project 1's IRR exceeds Project 2's IRR, then 1 must have a higher NPV than 2. e. If a project with normal cash flows has an IRR greater than WACC, the project must have a positive NPV. You purchase a house for $250,000. After you make your down payment of $50,000, you are financing $200,000 for 30 years at an annual percentage rate of 5.4%. How much are your monthly payments? Select one: a. Less than $1,000 b. Between $1,000 and $1,050 c. Between $1,050 and $1,100 d. Between $1,100 and $1,150 e. Greater than $1,200The decision rule for net present value is to: Select one: O a. accept all projects with positive net present values. O b. None of the options O c. accept all projects with cash inflows exceeding initial cost. O d. reject all projects with positive net present values.Under Net present value criterion, a project is approved if Select one: a. If present value is zero b. None of the option c. Its net present value is positive d. If present value of cash outflow is higher than inflow e. Its net present value is negative
- TRUE or FALSE 1. If all individual B/C ratios of MEAs are less than 1.00, then the preferred option is to “Do Nothing”.2. The concept of individual projects stems from the B/C ratio each project has to offer. Once it is feasible (i.e., BC >1), MEAs are born.3. Replacement analysis should be done at the end of the useful life of the property.4. If there is a past estimation error, there is a need to replace the property immediately.5. The physical life is always greater than all the other “life” factors under replacement analysis.6. If breakeven analysis is conducted with PW analysis for different MEAs, it doesn’t guarantee that the fastestalternative to reach its breakeven point has also the highest equivalent worth.7. In depreciation analysis, the method that will yield the highest book value at the end of n years is always the topfactor to consider.8. Replacement ends depreciation.9. If a property’s market value becomes 0, the owner has no right to sell it at a value > 0 since…A project is accepted if, I) II) III) IV) V) 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. Payback period is lower than the acceptable payback period. Which of the above statements are correct? А. I, I and II. B. I and IV С. I, II, IV, and V D. All of the above. ------Free Spirit's decision to accept or reject this project is independent of its decisions on other projects. Based on the project's PI, the firm should the project. By comparison, the net present value (NPV) of this project is in the project because the project, On the basis of this evaluation criterion, Free Spirit should increase the firm's value. When a project has a P1 greater than 1.00, it will exhibit an NPV Projects with Pls 1.00 will exhibit negative NPVs. ; when it has a PI of 1.00, it will have an NPV equal to $0.