Question 1:

Preference decisions compare potential projects that meet screening decision criteria and will be ranked in their preference order to differentiate between alternatives with respect to all of the following characteristicsexcept________________________________________.

feasibility

importance

desirability

political prominence

Question 2:

You are explaining time value of money factors to your friend. Which factor would you explain as being larger?

The future value of $1 for 12 periods at 6% is larger

the present value of $1 for 12 periods at 6% is larger

there is not enough information given to answer this question

neither one is larger because they are equal

Question 3:

You want to invest $8,000 at an annual interest rate of 8% that compounds annually for 12 years. Which table will help you determine the value of your account at the end of 12 years?

present value of an ordinary annuity

present value of one dollar (1$)

future value of an ordinary annuity

future value of one dollar ($1)

Question 4:

Grummet Company is acquiring a new wood lathe with a cash purchase price of $80,000. The Wood Master Industries ( the manufacturer)has agreed to accept $23,500 at the end of each year for the next 4 years. Based on this deal, how much interest will Grummet pay over the life of the loan?

$94,000

$23,500

$80,000

$14,000

Question 5:

Theprocess of reinvesting interest earned to generate additional earnings over time is ________________________________.

discounting

annuity

compounding

lump-sum

Question 6:

Which of the following doesnotassign a value to a business opportunity using time-value measurement tools?

net present value (NPV)

payback period method

internal rate of return (IRR) method

discounted cash flow model

Question 7:

This calculation determines profitability or growth potential of an investment, expressed as a percentage, at the point where NPV equals zero.

new present value (NPV)

discounted cash flow method

future value method

internal rate of return (IRR) method

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