Practice Discounted Cash Flow (DCF) Techniques - 25.5.B | 25. Capital Budgeting Techniques | Management 1 (Organizational Behaviour/Finance & Accounting)
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25.5.B - Discounted Cash Flow (DCF) Techniques

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Learning

Practice Questions

Test your understanding with targeted questions related to the topic.

Question 1

Easy

Define Net Present Value (NPV).

💡 Hint: Think about how future cash flows are valued against initial investments.

Question 2

Easy

What does a positive NPV indicate?

💡 Hint: Remember the acceptance rule based on cash flow values.

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 a net present value greater than zero signify?

  • Reject the project
  • Accept the project
  • Break even

💡 Hint: Remember the basic acceptance rule for investments based on cash flows.

Question 2

True or False: The Profitability Index can be used to prioritize projects when funds are limited.

  • True
  • False

💡 Hint: Think about how you evaluate which projects to invest in first.

Solve 1 more question and get performance evaluation

Challenge Problems

Push your limits with challenges.

Question 1

An investment project requires an initial outlay of $250,000 and expects to generate cash inflows of $80,000 at the end of each year for 4 years. Calculate the NPV using a discount rate of 12%. Thrive and discuss if the investment is beneficial.

💡 Hint: Break it down year by year to simplify.

Question 2

If a project has an unconventional cash flow pattern—say, it generates $50,000 in the first year, loses $20,000 in the second, and earns $60,000 in the third. Discuss how you would determine the IRR and the challenges faced.

💡 Hint: Focus on the pattern and implications on calculation methodologies.

Challenge and get performance evaluation