1. You have estimated the value of a planned project by finding the present value of all the cash inflows from that project. Which of the following would cause the project to look more appealing (have a greater net present value)?
A. The discount rate increases.
B. The cash flows are extended over a longer period of time, but the total dollar amount of the cash flows remains the same.
C. The discount rate decreases.
D. Answers (a) and (b) are correct.
E. Answers (b) and (c) are correct.
2. Concord Hospital is considering an investment project with an estimated internal rate of return (IRR) equal to 12 percent. Under what conditions should Concord Hospital accept the project? Choose the best answer.
A. The risk-adjusted opportunity cost of capital is 10 percent.
B. The project’s payback period is greater than the required payback period.
C. The net present value of the project is zero.
D. The risk-adjusted opportunity cost of capital is 15 percent.
E. The IRR is positive.