Question : 41. Butner Inc. requires all capital investments to generate an internal : 1295630

 

 

41. Butner Inc. requires all capital investments to generate an internal rate of return of 16%. The company is considering an investment costing $80,000 that is expected to generate equal, annual cash inflows for 5 years. The equal, cash inflows are expected to be: A. $24,433B. $16,000C. $38,088D. $12,800

 

42. Deciding whether or not an investment meets a predetermined company standard is called a: A. preference decision.B. payback decision.C. screening decision.D. profitability decision.

 

43. A company choosing between two or more acceptable investment alternatives is called a: A. profitability decision.B. payback decision.C. screening decision.D. preference decision.

 

44. The calculation of the profitability index (PI) is most helpful for which type of decisions? A. ScreeningB. PreferenceC. QualitativeD. Short-term

 

45. Which of the following statements regarding the profitability index is true? A. A profitability index greater than 1.0 means that the investment will take longer than one year to pay for itself.B. A profitability index greater than 1.0 means that the investment should not be made.C. When comparing projects, the one with the highest profitability index will have a longer payback period.D. When comparing projects, the one with the highest profitability index is preferred.

 

46. Which of the following statements comparing the NPV and IRR methods is false? A. Both the NPV and IRR methods can be used for screening decisions.B. Only the NPV method can be used to compare investments of various size or magnitude.C. Both the NPV and IRR methods can take income tax effects into account.D. Both the NPV and IRR methods are used for long-term decision making.

 

47. Vess Inc. is considering the following two projects: 

 

 

Project #1

Project #2

 

Initial investment

$20,000

$60,000

 

PV of cash inflows

26,000

66,000

 

 

 

 

 

 

Which of the following statements is true when comparing each of these projects? A. Project #1 has a higher profitability index.B. Project #2 has a higher net present value.C. They both have the same profitability index.D. They both have an unacceptable profitability index.

 

48. NC Products Inc. is considering investing in one of two projects. Both projects have a net present value of $25,000; however, Project #1 requires an initial investment of $300,000 while Project #2 requires an initial investment of $700,000. Based on this information, which of the following statements is true? A. Project #2 will have a higher profitability index.B. Project #1 will have a higher profitability index.C. Both projects will have the same profitability index.D. There is not enough information to determine the profitability index of either project.

 

49. Charles Inc. has the following information available regarding one of the projects it is considering: 

 

Initial investment

$50,000

 

PV of cash inflows

55,000

 

 

 

The profitability index of this project is: A. 5,000B. .9090C. 1.10D. 105,000

 

50. Peterson Inc. has the following information available regarding one of the projects it is considering: 

 

Initial investment

$75,000

 

PV of cash inflows

$100,000

 

Internal rate of return

15%

 

 

 

The profitability index of this project is: A. 1.33B. .75C. .15D. .33

 

 

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