Quiz Ch 08 – Assessing Performance with Net Income-based Methods
Essentials of Corporate Finance
Ross, Westerfield, and Jordan
10th Edition
Which analytical method relies on net income as a basis for evaluation?
Which analytical method relies on net income as a basis for evaluation?
Which characteristic best describes the average accounting return metric?
What assumption can be drawn about a project that demands an initial $100,000 investment at time zero and subsequently generates $20,000 each year for 5 years?
When firms utilize the payback rule for investment decisions, what type of projects might they exhibit a bias toward rejecting?
What analysis method exhibits the highest bias towards short-term projects?
What is the measure that represents the average net income of a project divided by its average book value?
If Mary has limited time to analyze an investment and must choose only one method, which method should she use to provide a quick assessment?
In the absence of capital rationing, which project should be chosen when a firm intends to use the profitability index to decide between two mutually exclusive investments?
In the context of mutually exclusive lending projects, where Project A has an IRR of 20% and Project B has an IRR of 30%, what conditions would make you more likely to opt for Project A over Project B?
In which scenario would the payback method be the most suitable method of analysis?