If the net present value of a project is positive then the:
a. project would be unacceptable under the internal rate of return method.
b. project's rate of return is greater than the firm's cost of capital.
c. project would be acceptable under the payback method.
d. All of the above are correct.
If the net present value of a project is positive then the:
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Related questions
QUESTION 11
- If the firm is being operated so as to maximize shareholderwealth, and if our basic assumptions concerning the relationshipbetween risk and return are true, then which of the followingshould be true?
A. | If the beta of the asset is greater than the corporate betaprior to the addition of that asset, then the corporate beta afterthe purchase of the asset will be smaller than the originalcorporate beta. | |
B. | If the beta of an asset is larger than the firm's beta, then therequired rate of return is equal to the beta. | |
C. | If the beta of an asset is larger than the corporate beta priorto the addition of that asset, then the required return on the firmwill be greater after the purchase of that asset than prior to itspurchase. | |
D. | If the beta of the asset is larger than the firm's beta, thenthe required return on the asset is less than the required returnon the firm. | |
E. | If the beta of the asset is smaller than the firm's beta, thenthe required return on the asset is greater than the requiredreturn on the firm. |
5 points
QUESTION 12
- A project's net present value is equal to:
A. | the present value of the cash outflows plus the present value ofcash inflows. | |
B. | the present value of the last cash inflow. | |
C. | the present value of all the expected future cash outflows. | |
D. | the present value of all the cash inflows after the fullrecovery of the initial investment. | |
E. | the present value of the expected future cash flows minus thepresent value of all the cash outflows. |
5 points
QUESTION 13
- The chance of receiving an actual return that differs from theone that is expected is called _____.
A. | payoff | |
B. | beta | |
C. | karma | |
D. | probability distribution | |
E. | risk |
5 points
QUESTION 14
- If the NPV of a project is positive, it means that:
A. | the project's discounted payback period is less than its paybackperiod. | |
B. | the internal rate of return is lower than the discount rateused. | |
C. | the project is not acceptable on a risk adjusted basis. | |
D. | accepting the project increases the value of the firm. | |
E. | the project's discounted payback period is longer than theuseful life of the project. |
5 points
