1) The time it takes for cash inflows to repay an initial investment is referred to as ? a) Payback period b) Accounting rate of return 2) When a projects discounted cash flow is zero this in know as the ... a) Net present value b) Internal rate of return 3) A project has the following NPV (198,000) at a 15% discount rates. Estimate its IRR? a) 0% b) 15% c) 10% d) 20% 4) Which method am I? A disadvantage of this method is it is based on profits not cashflow a) ARR b) IRR 5) If the internal rate of return of a project is higher than the organisations cost of capital or higher than its required return from investments the project should be? a) Accepted b) Rejected 6) A machine costs £100,000 now. We expect net cash flows of £30,000 in one years’ time. £40,000 in two years’ time. £60,000 in three years’ time and £10,000 in four years’ time. Calculate the payback period for the investment in years and months  a) 2 years and 6 months b) 2 years and 2 months 7) The time of value of money is adjusted using a discount factor and when used to compare cash inflow and cash out flow is referred to as  a) Internal rate of return b) Net present value

Long term decision making

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