1.

1. Even if project X has a higher IRR than project Y, project Y may have a higher net present value than project X.

   		True
   		False

2. A project's NPV is positively related to its discount rate.

True

False

3. A project requires an initial outlay of $200,000 and will generate the following cash flows over the next 6 years:

Year	Cash Flow
1	20,000
2	85,000
3	50,000
4	50,000
5	90,000
6	30,000

The required return for this project is 12%. Find the profitability index.

		1.0963
		.0963
		1.082
		.082

4. Alpha company is considering a project that costs $150,000. The project is expected to generate $30,000 in year one, -$25,000 in year two and $180,000 in year three. Find the modified internal rate of return. The required rate of return is 8%

		7.84%
		7.40%
		8.82%
		6.59%

5. If a project has multiple internal rates of return, the lowest rate should be used for decision making purposes.

True

False

6. An independent project that requires an initial investment of $340,000 is expected to have an after-tax cash flow of $70,000 per year for the first two years, -$90,000 per year for the next two years, and $550,000 for the fifth year. Would you take this project based on MIRR analysis if your required return is 10%?

		Yes
		No
		You'd be indifferent between accepting and rejecting it.
		Cannot be determined.

7.MIRR assumes cash flows received during the life of the project are reinvested at the company's required rate of return.

True

False