If a project costs R100,000 to implement, and generates net cash flows of R30,000 a year for 10 years, what is its payback period?

Select one:

a. Three years

b. Two years

c. 10 years

d. Four years

e. Five years

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Question 9

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If a projects initial investment is R800,000, and it has an NPV of R120,000, what is its profitability index?

Select one:

a. 0.15

b. 1.15

c. -0.15

d. 0.85

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Question 10

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If a projects NPV is R278,000, and the PV of its cash flows is R2,140,365, what is its initial investment?

Select one:

a. R1,862,365

b. R2,814,635

c. R1,862,635

d. R2,418,365

e. R1,592,365

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Question 11

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If the internal rate of return of a project is higher than the required rate of return for the firm:

Select one:

a. The firm should consider the project as long-term wealth will be created.

b. The firm should not consider the project as long-term wealth will be destroyed.

c. The firm should increase its required rate of return to meet the internal rate of return.

d. The firm should reduce its required rate of return to increase the internal rate of return.

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Question 12

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If the PI of a project was between zero and one, what would the NPV of that same project be?

Select one:

a. Positive

b. Negative

c. Equal to zero

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Question 13

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The further ahead in time one attempts to make projections, the:

Select one:

a. Lower the risk

b. Greater the return

c. Lower the return

d. Greater the risk

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Question 14

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The IRR is the discount rate at which:

Select one:

a. NPV = 0

b. PI = 0

c. NPV = PI