question 1

Net Present Value Technique

I. consider time value of money in evaluating projects

II. all of the above

III. none of the above.

IV. is consistent with the goal of shareholder wealth maximization

question 2

Andi Acquisition, Inc. is considering the purchase of Kristina Covington Company. The acquisition would require an initial investment of $190,000, but Andi?s after-tax net cash flow would increase by $50,000 per year and remain at this new level forever. Assume a cost of capital of 20 percent. Should Andi buy Kristina Company?

i. no, because cost of capital

ii. yes,becasue the npv =$50,000

III. yes,because the irr

iv. none of the above

v. yes,becasue the npv= $60,000

question 3

The internal rate of return is:

	I.	The rate of return that makes the NPV positive.
	II.	The discount rate that equates the present value of the cash inflows with the initial investment
	III.	The discount rate that makes the NPV positive. .
	IV.	none of the above
	V.	The discount rate that makes NPV negative and the PI greater than one

V. uses all the cash flows of a project when computing the net present value