Question :
83.In order for a manager to correctly decide to postpone : 1284584
83.In order for a manager to correctly decide to postpone an investment until one year into the future, the NPV of the investment should:
A. grow more rapidly than the IRR.
B. grow more rapidly than the cost of capital.
C. not decrease.
D. remain stable.
84.The NPV of an investment made today is $10,000. If postponed for one year, the NPV at that time will increase by $1,000. Which of the following is correct if the opportunity cost of the investment is 12%?
A. Postpone; the NPV increases by a positive amount.
B. Postpone; the NPV will be larger.
C. Invest now; NPV does not grow at a sufficient rate.
D. Invest now; always accept positive NPV projects.
85.What happens to the equivalent annual cost of a project as the opportunity cost of capital decreases?
A. It increases.
B. It decreases.
C. It is not affected.
D. It depends on whether or not the projects are mutually exclusive.
86.What is the equivalent annual cost for a project that requires a $40,000 investment at time-period zero, and a $10,000 annual expense during each of the next 4 years, if the opportunity cost of capital is 10%?
A. $20,000.00
B. $21,356.95
C. $22,618.83
D. $25,237.66
87.A currently used machine costs $10,000 annually to run. What is the maximum that should be paid to replace the machine with one that will last 3 years and cost only $4,000 annually to run? The opportunity cost of capital is 12%.
A. $2,000
B. $9,607
C. $14,411
D. $24,018
88.Because of its age, your car costs $4,000 annually in maintenance expense. You could replace it with a newer vehicle costing $8,000. Both vehicles would be expected to last 4 more years. If your opportunity cost is 8%, by how much must maintenance expense decrease on the newer vehicle to justify its purchase?
A. $1,250
B. $1,585
C. $2,000
D. $2,415
89.You can continue to use your less efficient machine at a cost of $8,000 annually for the next 5 years. Alternatively, you can purchase a more efficient machine for $12,000 plus $5,000 annual maintenance. At a cost of capital of 15%, you should:
A. Buy the new machine and save $600 in equivalent annual costs.
B. Buy the new machine and save $388 in equivalent annual costs.
C. Keep the old machine and save $388 in equivalent annual costs.
D. Keep the old machine and save $580 in equivalent annual costs.
90.Which of the following best illustrates the problem imposed by capital rationing?
A. Accepting projects with the highest NPVs first
B. Accepting projects with the highest IRRs first
C. Bypassing projects that have positive NPVs
D. Bypassing projects that have positive IRRs
91.Soft capital rationing:
A. is costly to shareholders.
B. is used to determine mutually exclusive projects.
C. should be costless to the shareholders of the firm.
D. solves the problem of investment timing.
92.Soft capital rationing is imposed upon a firm from _____ sources, while hard capital rationing is imposed from _____ sources.
A. internal; external
B. internal; internal
C. external; internal
D. external; external
