Corporate Finance
Corporate Finance Mastery Quiz
Test your knowledge of corporate finance with our engaging quiz! This quiz consists of 10 carefully crafted questions that cover essential investment appraisal techniques, including Payback Period, Net Present Value, and Internal Rate of Return.
Challenge yourself and see how well you can navigate these critical concepts and definitions in corporate finance.
- Assess your understanding of key financial concepts.
- Improve your skills and knowledge in investment appraisal techniques.
- Perfect for students and professionals alike!
Which of this inestment appraisal techniques is not a discounted technique?
Accounted Rate of return
Profitability Index
Net Present Value
Simple payback period
A disadvantage of pay-back period is:
Computational simplicity
Easy to understand
Focus on cash flow
Cutoff period is arbitrary
Formula of Present Value is the following one:
FV=PV/(1+R)^n
Average profits after taxes/ average investment
PV of future cash flows/Initial investment
Inflows/outflows
You must accept a project if:
Profitability Index < 0
Probitability Index > 1
Accounting rate of return = 0
Profitability Index > 0
Profitability Index > 1 means…
Negative NPV
Positive NPV
Positive rate of return
Negative accounting rate of return
A con of the Net Present Value is:
Lacks the intuitive appeal of payback
Focuses on cash flows, not accounting earnings
Makes appropriate adjustment for time value of money
Can properly account for risk differences between projects
An advantege of IRR (Internal Rate of Return):
Uses cash flows rather than earnings
Accounts for all cash flows
Project IRR is a number with intuitive appeal
All answers are correct
A definition of Net Present Value is:
The discount rate that results in a zero NPV for a project.
The sum of the present values of a project’s cash inflows and outflows
The amount of time required for the firm to recover its initial investment
All answers are incorrect
A technique is considered consistent with wealth maximization if…
Considers time value of money
It is based on cash flows
Considers all the cash flows
All answers are correct
A disadvantage of IRR (Internal Rate of Return):
Properly adjusts for time value of money
Uses cash flows rather than earnings
Multiple IRRs, no real solutions
Accounts for all cash flows
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