Question $1(4$ Marks$)$ Multiple Choice questions

$1)$ The net present value of an investment represents the difference between the

investment$$s:

a$)$ Produce a positive cash flow from assets c$)$ Offset its fixed expenses

b$)$ Offset its total expenses d$)$ Recoup its initial cost

$2)$ The payback period is the length of time it takes an investment to generate sufficient cash flows to enable the project to:

a$)$ Produce a positive cash flow from assets c$)$ Offset its fixed expenses

b$)$ Offset its total expenses d$)$ Recoup its initial cost

$3)$ Which one of the following defines the internal rate of return for a project?

a$)$ Discount rate that creates zero cash flow form assets

b$)$ Discount rate that results in a zero$-$net present value for the project

c$)$ Discount rate theta results in a net present value equal to the project$$s initial cost

d$)$ Rate of return required by the project$$s investors

$4)$ The net present value:

a$)$ Decreases as the required rate of return increases

b$)$ Is equal to the initial investment when the internal rate of return is equal to the required return

c$)$ Is directly related to the discount rate

d$)$ Is unaffected by the timing of an investment$$s cash flows

$5)$ Which one of the following is generally considered to be the best form of analysis if you have to select a single method to analyse a variety of investment opportunities?

a$)$ Payback c$)$ Accounting rate of return

b$)$ Internal rate of return d$)$ Net present value

$6)$ Which one of the following indicates that an investment project should be rejected?

a$)$ Average accounting rate of return that exceeds the requirement

b$)$ Payback period that is shorter that the requirement period

c$)$ Negative net present value

d$)$ Internal rate of return that exceeds the required return

$7)$ Which one of the following methods of investment analysis ignores cash flows?

a$)$ Net present value c$)$ accounting rate of return

b$)$ Internal rate of return d$)$ Payback period

$8)$ Which one of the following analytical methods is based on net income?

a$)$ Net present value c$)$ Internal rate of return

b$)$ Accounting rate of return d$)$ Payback period