Question 1

Which of the following is an advantage of using the payback period?

Accepted Answer

A)   It ignores cash inflows after the payback point has been reached.
B)   It ignores the actual timing of cash flows.
C)   It is useful measure of the speed with which a project will pay back its initial costs.
D)   It takes no account of the time value of money.E) B) and C)
F) C) and D)

Question 2

Jigger Ltd is considering undertaking project X, which will involve an initial outlay of £600k. The project has the following cash inflows associated with it:
 What is the NPV of project X if a 12% discount rate is used?

Accepted Answer

A)   A positive NPV of £118k
B)   A negative NPV of £118k
C)   A positive NPV of £200k
D)   A positive NPV of £718kE) None of the above
F) C) and D) A

Question 3

Jigger Ltd is considering two alternative projects; each of which will involve an initial outlay of £600,000. Both will have a four-year life and are expected to yield the following cash inflows:
 Which of the following is not true?

Accepted Answer

A)   Project X has a payback period of 3 years.
B)   Project Y has a payback period of 2.5 years.
C)   Project X will always yield a higher NPV than project Y.
D)   Project Y will always yield a higher NPV than project X.E) None of the above
F) B) and C)

Question 4

Which of the following statements concerning the IRR is true?

Accepted Answer

A)   The IRR does not take account of the time value of money.
B)   The IRR does not take account of the all the project cash flows.
C)   The IRR is the sum of the discounted cash flows of a project.
D)   The IRR is the discount rate that, when applied to a project's cash flows, gives an NPV of zero.E) C) and D)
F) None of the above

Question 5

Alternative projects, M and N, have been evaluated and the following results found:
 Which of the following is the most valid reason for choosing to undertake project N?

Accepted Answer

A)   Project N has a longer payback period than project M
B)   Project N will yield the highest accounting rate of return.
C)   Project N will yield the highest NPV.
D)   Project N will give rise to greater cash flows than project M.E) B) and C)
F) All of the above

Question 6

The cash flows associated with a project are as follows:
 The payback period for the project is:

Accepted Answer

A)   3 years and 3 months.
B)   3 years and 4 months.
C)   4 years and 3 months.
D)   3 years.E) A) and B)
F) None of the above

Question 7

A business can either receive £200 now or an agreed amount in two years' time. If the business requires a return of 12% on sums invested, what is the minimum amount the business should agree to receive in two years' time?

Accepted Answer

A)   £224
B)   £251
C)   £159
D)   £179E) None of the above
F) B) and D) B

Question 8

Shep Ltd is considering a possible four-year project. Details are as follows:
 The accounting rate of return of this project will be:

Accepted Answer

A)   39.1%.
B)   11.9%.
C)   19.6%.
D)   23.9%.E) B) and C)
F) A) and D)

Question 9

If a 10% discount rate is used, what is the present value of the following two cash inflows?
£1,600 received in one year's time, plus
£2,000 received in two years' time.

Accepted Answer

A)   £3,116
B)   £2,988
C)   £3,276
D)   £3,148E) All of the above
F) B) and C) A

Question 10

What does the accounting rate of return measure?

Accepted Answer

A)   The total profits expected from the project, expressed as a percentage of the average annual investment in the project.
B)   The total profits expected from the project, expressed as a percentage of the initial outlay.
C)   The average annual expected profit expressed as a percentage of the average funds invested in it.
D)   The average annual expected profit expressed as a percentage of the initial outlay.E) B) and C)
F) A) and D)

Exam 15: Investment Appraisal Techniques

Which of the following is an advantage of using the payback period?

Correct Answer
verified

Jigger Ltd is considering undertaking project X, which will involve an initial outlay of £600k. The project has the following cash inflows associated with it: What is the NPV of project X if a 12% discount rate is used?

Correct Answer
verified
A

Jigger Ltd is considering two alternative projects; each of which will involve an initial outlay of £600,000. Both will have a four-year life and are expected to yield the following cash inflows: Which of the following is not true?

Correct Answer
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Which of the following statements concerning the IRR is true?

Correct Answer
verified

Alternative projects, M and N, have been evaluated and the following results found: Which of the following is the most valid reason for choosing to undertake project N?

Correct Answer
verified

The cash flows associated with a project are as follows: The payback period for the project is:

Correct Answer
verified

A business can either receive £200 now or an agreed amount in two years' time. If the business requires a return of 12% on sums invested, what is the minimum amount the business should agree to receive in two years' time?

Correct Answer
verified
B

Shep Ltd is considering a possible four-year project. Details are as follows: The accounting rate of return of this project will be:

Correct Answer
verified

If a 10% discount rate is used, what is the present value of the following two cash inflows? £1,600 received in one year's time, plus £2,000 received in two years' time.

Correct Answer
verified
A

What does the accounting rate of return measure?

Correct Answer
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Exam 15: Investment Appraisal Techniques

Which of the following is an advantage of using the payback period?

Correct AnswerverifiedShow Answer

Jigger Ltd is considering undertaking project X, which will involve an initial outlay of £600k. The project has the following cash inflows associated with it: What is the NPV of project X if a 12% discount rate is used?

Correct AnswerverifiedA

Jigger Ltd is considering two alternative projects; each of which will involve an initial outlay of £600,000. Both will have a four-year life and are expected to yield the following cash inflows: Which of the following is not true?

Correct AnswerverifiedShow Answer

Which of the following statements concerning the IRR is true?

Correct AnswerverifiedShow Answer

Alternative projects, M and N, have been evaluated and the following results found: Which of the following is the most valid reason for choosing to undertake project N?

Correct AnswerverifiedShow Answer

The cash flows associated with a project are as follows: The payback period for the project is:

Correct AnswerverifiedShow Answer

A business can either receive £200 now or an agreed amount in two years' time. If the business requires a return of 12% on sums invested, what is the minimum amount the business should agree to receive in two years' time?

Correct AnswerverifiedB

Shep Ltd is considering a possible four-year project. Details are as follows: The accounting rate of return of this project will be:

Correct AnswerverifiedShow Answer

If a 10% discount rate is used, what is the present value of the following two cash inflows? £1,600 received in one year's time, plus £2,000 received in two years' time.

Correct AnswerverifiedA

What does the accounting rate of return measure?

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
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A

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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B

Correct Answer
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Correct Answer
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A

Correct Answer
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