the investment ' s cost exceeds the present value of the cash inflows . the project ' s rate of return exceeds the rate of inflation . the required cash inflows exceed the actual cash inflows . they return the initial cash outlay within three years or less .
4 . Accepting a positive net present value ( NPV ) project : indicates the project will pay back within the required period of time . is expected to increase the stockholders ’ value by the amount of the NPV . ignores the inherent risks within the project . guarantees all cash flow assumptions will be realized . means the present value of the expected cash flows is equal to the project ’ s cost .
5 . The net present value method of capital budgeting analysis does all of the following except : use all of a project ' s cash flows . discount all future cash flows . consider all relevant cash flow information . incorporate risk into the analysis . provide a specific anticipated rate of return .
6 . What is the net present value of a project with an initial cost of $ 36,900 and cash inflows of $ 13,400 , $ 21,600 , and $ 10,000 for Years 1 to 3 , respectively ? The discount rate is 13 percent .
7 . Maxwell Software , Inc ., has the following mutually exclusive projects .
a-1 . Calculate the payback period for each project . ( Do not round intermediate calculations and round your answers to 3 decimal places , e . g ., 32.161 .)
Payback period Project A 1.938 years Project B 2.063 years ________________________________________
a-2 . Which , if either , of these projects should be chosen ?