Stock

Valuation
Seatwork

1
TRUE or FALSE
1. Internal Rate of Return is the
discount rate that equates the
present value of the project's
future net cash flows with the
project's initial outlay.

2
TRUE or FALSE
2. If IRR  required rate of return, the investment
will be accepted.

3
TRUE or FALSE
3. Equivalent annuity cash flow amount
that is equivalent to the project’s NPV.

4
TRUE or FALSE
4. The payback period is calculated by adding the
cash inflows up until they are equal to the initial
fixed investment.

5
TRUE or FALSE
5. The discounted payback period is defined as
the number of years needed to recover the
initial cash inflow from the discounted free
cash flows.

6
TRUE or FALSE
6. Net Present Value is a method of
ranking investment proposals using
the NPV, which is equal to the
present value of future net cash
flows, discounted at the cost of
capital.

7
TRUE or FALSE
7. The main difference between ARR and IRR is
that IRR is a discounted cash flow formula while ARR is
a non-discounted cash flow formula.

8
TRUE or FALSE
8. ARR is computed:

9
TRUE or FALSE
9. A profitability index or ratio above 1 indicates
that the project should be abandoned.

10
TRUE or FALSE
10. If the risk associated with the investment is
greater than the risk involved in a typical
endeavor, then the discount rate is adjusted
downward to compensate for this risk.

11
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