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FIN571 Phoenix Week 5 Investment and Net Present Value Quiz 1

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FIN 571 - Week 5 - WileyPLUS - Practice Quiz Multiple Choice Question 55 Genaro needs to capture a return of 40 percent for his one-year investment in a property. He believes that he can sell the property at the end of the year for $150,000 and that the property will provide him with rental income of $25,000. What is the maximum amount that Genaro should be willing to pay for the property? $137,500 $125,000 $112,500 $150,000 Working Multiple Choice Question 54 The process of identifying the bundle of projects that creates the greatest total value and allocating the available capital to the projects is known as risk analysis. rationing. capital rationing. budgeting. Multiple Choice Question 78 Capital rationing. You are considering a project that has an initial cost of $1,200,000. If you take the project, it will produce net cash flows of $300,000 per year for the next six years. If the appropriate discount rate for the project is 10 percent, what is the profitability index of the project? 2.09 0.09 1.09 2.18 Workings Multiple Choice Question 89 What might cause a firm to face capital rationing? If a firm rejects some capital investments that are expected to generate positive NPV’s. If investors require returns for their capital that are too high. If a firm has more than one project with a positive NPV. If a firm has several projects that are expected to generate negative IRR’s. Multiple Choice Question 59 How firms estimate their cost of capital: The WACC for a f ...
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