1. NPV is often preferred for which reason?

1. It is theoretically valued
2. It is well understood by real-world finance professionals
3. It is well understood by real-world finance professionals
4. All of these are reasons NPV is preferred

2. Elective expensing

1. Allows the company to determine its own depreciation schedule
2. Allows the company to write off the full value of tangible property up to established limits
3. Encourages a company to extend the depreciable period
4. Encourages a company to not depreciate assets

3. This method combines the idea of finding the discount rate (return) that gives a zero net present values with the assumption funds are reinvested at the firms discount rate.

1. Payback method
2. Net present value
3. Internal rate of return
4. Modified internal rate of return

4. In a case where two projects are not mutually exclusive and have returns exceeding the cost of capital, the firm should

1. Pursue both projects
2. Pursue the project with the highest rate of return
3. Pursue neither project
4. We do not have enough information to decide

5. When calculating the net present value, the discount rate used is generally

1. The firms cost of capital
2. The projects expected rate of return
3. The projects internal rate of return
4. The firms cost of financing for the financing method used for that specific project

6. In using NPV and/or IRR,

1. Both methods will often accept and reject the same projects
2. NPV will almost always result in a better decision
3. IRR will almost always result in a better decision
4. The drawbacks to IRR mean it should not be used

7. The reinvestment assumption

A. Tells us what rate any proceeds from a project should earn

B. Provides a secondary cutoff rate for evaluating projects

C. Funds will not be reinvested because we cannot determine what rate those funds would earn

D. Should be different for each project based on that individual projects rate of return