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Practice Questions
Test your understanding with targeted questions related to the topic.
Question 1
Easy
What does the Payback Period measure?
💡 Hint: Think about the initial investment and how long it takes to get that back.
Question 2
Easy
What does the Profitability Index indicate?
💡 Hint: What does it mean if the PI is greater than one?
Practice 4 more questions and get performance evaluation
Interactive Quizzes
Engage in quick quizzes to reinforce what you've learned and check your comprehension.
Question 1
What does the Payback Period ignore?
- Cash flows after recovery
- Initial investment
- Discount rate
💡 Hint: Think about how long it takes to recoup your money.
Question 2
True or False: The Internal Rate of Return considers the time value of money.
- True
- False
💡 Hint: Consider how IRR is calculated.
Solve 1 more question and get performance evaluation
Challenge Problems
Push your limits with challenges.
Question 1
A company has two projects to consider: Project A costs $150,000 and is expected to provide cash inflows of $60,000 each year for 3 years. Project B costs $150,000 and is expected cash inflows of $70,000 in years 1 and 2, and $20,000 in year 3. Calculate both projects’ NPV at a discount rate of 8% and identify which project to accept.
💡 Hint: Utilize the NPV calculation method learned previously.
Question 2
If a project requires an initial investment of $200,000 and offers a return of $50,000 for the first three years, then an amount of $10,000 for the last two years, what is the project's Payback Period and why might it be a risky investment?
💡 Hint: Consider annual cash inflows and the return compared to the initial investment.
Challenge and get performance evaluation