Part A: Choose the correct option for each question (investments) A) increased, increased B) increased, decreased C) decreased, increased D) decreased, decreased E) No change, increased F) No change, decreased Question 1. In an investment, what effect does decreasing the frequency of payments have on the total principal invested and on the interest paid? 2. In an investment, what effect does decreasing the payment amount have on the total principal invested and on the interest paid? 3. In an investment, what effect does decreasing the frequency of compound periods have on the total principal invested and on the interest paid? 4. In an investment, what effect does increasing the interest rate have on the total principal invested and on the interest paid? 5. In an investment, what effect does decreasing the interest rate have on the total principal invested and on the interest paid? Answer [Ex: E) No change, Increased)

Part A: Choose the correct option for each question (investments) A) increased, increased B) increased, decreased C) decreased, increased D) decreased, decreased E) No change, increased F) No change, decreased Question 1. In an investment, what effect does decreasing the frequency of payments have on the total principal invested and on the interest paid? 2. In an investment, what effect does decreasing the payment amount have on the total principal invested and on the interest paid? 3. In an investment, what effect does decreasing the frequency of compound periods have on the total principal invested and on the interest paid? 4. In an investment, what effect does increasing the interest rate have on the total principal invested and on the interest paid? 5. In an investment, what effect does decreasing the interest rate have on the total principal invested and on the interest paid? Answer [Ex: E) No change, Increased)

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter11: Capital Budgeting Decisions

Section: Chapter Questions

Problem 16MC: When using the NPV method for a particular investment decision, if the present value of all cash...

See similar textbooks

Similar questions

Explain what is meant by the internal rate of return of an investment and discuss its relationship to the NPV of an investment. Explain the problems posed for the use of the IRR when it is necessary (i) to choose between two investments and when (ii) investments are characterised by negative net cash flows at the end of their lives. Discuss and evaluate the use of the payback period as an investment criterion.
Which one of the following is an indicator that an investment is acceptable? Check all that apply: Profitability index equal 1.5 Profitability index greater than 0 the required return less than internal rate of return IRR equal to zero Payback period exceeds the required period Profitability index equal 1
A realized return is the rate of return actually earned on an investment. Group of answer choices True False
The expected value of an investment: Answer a. Is what the owner will receive when the investment is sold b. Is the sum of the payoffs c. Is the probability-weighted sum of the possible outcomes d. Cannot be determined in advance
P 9-2 Investment Scenarios (LO 9-3) Arkansas Best Freightways is considering a purchase of three different potential trucks but is uncertain of the cash inflows associated with the following investment scenarios. Year Year 0 (today) Year 1 Year 2 Year 3 Year 4 Buy new truck Increased profits Increased profits Increased profits Increased profits Investment 1 (85,000) 25,000 25,000 25,000 25,000 Investment 2 (105,000) 20,000 30,000 40,000 50,000 Investment 3 (125,000) 40,000 30,000 20,000 10,000
Which of the following is not an advantage of the average rate of return method? a.includes the amount of income earned over the entire life of the proposal b.takes into consideration the time value of money c.emphasizes accounting income d.easy to use
Discounting an investment’s cash flows using the internal rate of return will result in which of the following? Group of answer choices net present value of one net present value of zero positive net present value negative net present value
Which of the following methods does not consider the investment’s profitability? a. ARR b. Payback c. NPV d. IRR
If the internal rate of return (IRR) of a well-behaved investment alternative is equal to MARR, which of the following statements about the other measures of worth for this alternative must be true? i. PW = 0 ii. AW = 0. Solve, a. I onlyb. II only c. Neither I nor II d. Both I and II.
Which of the following decision criteria is the easiest to use and very popular among investors? O Payback period. O Internal rate of return. O Average accounting return. Net present value. O Discounted return on investment.
Question 2 You must choose between two investments, X and Y . The profitability index (PI), net present value (NPV) and internal rate of return (IRR) of the two investments are as follows: Criteria Investment X Investment Y NPV R44 000 −R22 000 PI 1,945 0,071 IRR 16,00% 8,04% Which investment(s) should you choose, taking all the above criteria into consideration, if the cost of capital is equal to 12% per year? [1] X [2] Y [3] Both X and Y [4] Neither X nor Y [5] Too little information to make a decision 17 DSC1630
iv. Compute each investment’s Internal Rate of Return (IRR). v. Which investment should Mr. Dates accept and why? vi. Based on the above calculations and analysis, what has caused the ranking conflict?