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Tax Cash Flows Quiz

The disadvantages of the book rate of return method is/are:

The IRR is defined as:

Saline Company is considering investing in a new project. The project will need an initial investment of $1,200,000 and will generate $600,000 (after-tax) cash flows for three years. Calculate the IRR for the project.

Werney Company is considering investing in a new project. The project will need an initial investment of $1,200,000 and will generate $600,000 (after-tax) cash flows for three years. Calculate the NPV for the project if the cost of capital is 15%.

Profitability index is the ratio of:

Present values are value additive

The discounted payback rule calculates the payback period and then discounts it at the opportunity cost of capital.

The IRR rule states that firms should accept any project offering an internal rate of return in excess of the cost of capital.

MIRRs have the value additivity property, while IRRs do not.

Soft rationing may be used to control managerial behavior.

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