LO 11.1Preference decisions compare potential projects that meet screening decision criteria and will be ranked in their preference order to differentiate between alternatives with respect to all of the following characteristics *except* ________.

- political prominence
- feasibility
- desirability
- importance

LO 11.3You are explaining time value of money factors to your friend. Which factor would you explain as being larger?

- The future value of $1 for 12 periods at 6% is larger.
- The present value of $1 for 12 periods at 6% is larger.
- Neither one is larger because they are equal.
- There is not enough information given to answer this question.

LO 11.3If you are saving the same amount each month in order to buy a new sports car when the new models are released, which of the following will help you determine the savings needed?

- future value of one dollar ($1)
- present value of one dollar ($1)
- future value of an ordinary annuity
- present value of an ordinary annuity

LO 11.3You want to invest $8,000 at an annual interest rate of 8% that compounds annually for 12 years. Which table will help you determine the value of your account at the end of 12 years?

- future value of one dollar ($1)
- present value of one dollar ($1)
- future value of an ordinary annuity
- present value of an ordinary annuity

LO 11.3Using the information provided, what transaction represents the best application of the present value of an annuity due of $1?

- Falcon Products leases an office building for 8 years with annual lease payments of $100,000 to be made at the beginning of each year.
- Compass, Inc., signs a note of $32,000, which requires the company to pay back the principal plus interest in four years.
- Bahwat Company plans to deposit a lump sum of $100,000 for the construction of a solar farm in 4 years.
- NYC Industries leases a car for 4 yearly annual lease payments of $12,000, where payments are made at the end of each year.

LO 11.3Grummet Company is acquiring a new wood lathe with a cash purchase price of $80,000. The Wood Master Industries (the manufacturer) has agreed to accept $23,500 at the end of each of the next 4 years. Based on this deal, how much interest will Grummet pay over the life of the loan?

- $94,000
- $80,000
- $23,500
- $14,000

LO 11.3The process of reinvesting interest earned to generate additional earnings over time is ________.

- compounding
- discounting
- annuity
- lump-sum

LO 11.4Which of the following does *not* assign a value to a business opportunity using time-value measurement tools?

- internal rate of return (IRR) method
- net present value (NPV)
- discounted cash flow model
- payback period method

LO 11.4This calculation determines profitability or growth potential of an investment, expressed as a percentage, at the point where NPV equals zero

- internal rate of return (IRR) method
- net present value (NPV)
- discounted cash flow model
- future value method

LO 11.5When using the NPV method for a particular investment decision, if the present value of all cash inflows is greater than the present value of all cash outflows, then ________.

- the discount rate used was too high
- the investment provides an actual rate of return greater than the discount rate
- the investment provides an actual rate of return equal to the discount rate
- the discount rate is too low