Quizz 1 FAD

The investment decision is a decision regarding:

• Short Term

• Long Term

The investment cycle involves the acquisition and use of fixed assets necessary for the development of the company's activities.

• True

• False

.........................................aims to increase productivity by introducing modern and advanced equipment.

• Renewal investment

• Investment in modernization

• Replacement investment

The present value (PV) corresponds to:

• The sum of the cash flows generated by an asset, discounted at the discount rate

• The creation or destruction of value that the realization of an investment can entail

• none of these answers

Is the NPV the best criterion for investment choice?

• True

• False

• Not enough information to answer

Net present value (NPV):

• Cannot be negative

• Is a relevant criterion for choosing between several projects with different initial costs

• Decreases when the discount rate increases

• None of the above

An investment project is characterized by an NPV = -2.4384

This project is considered:

• Profitable

• Non-profitable

• None of the above

Knowing that the net present value of a project is NPV = -2.4384 and its PI = 0.987808,

What would be its initial investment I0:

• I0 = 200,000 TND

• I0 = 400,000 TND

• None of the above

A company wants to invest in a machine that costs 20,000 TND. Its estimated lifespan is 5 years. According to forecasts for this investment, the company would incur a gross result of -10,000 TND in the first year and would be taxed at a rate of 15%.

What would be the value of its first cash flow (CF)?

• 6,000 TND

• 10,000 TND

• -6,000 TND

• None of the above

A company plans to invest in an industrial machine to be imported from China.

Its price is 100,000 TND. Customs fees amount to 12,500 TND, and transportation costs are 5,000 TND.

A Chinese engineer had to travel to provide training to the technicians responsible for the new machine. He will be paid 22,500 TND, including travel expenses.

This investment is expected to have net cash flows over its lifespan as follows:

Year 1: Discounted cash flow = 53,000 TND

Year 2: Discounted cash flow = 68,000 TND

Year 3: Discounted cash flow = 47,000 TND

• The NPV of this investment is 28,000 TND and its PI is 1.2, so it is profitable.

• The NPV of this investment is -28,000 TND and its PI is 0.83, so it is profitable.

• The NPV of this investment is -28,000 TND and its PI is 0.83, so it is not profitable.

• None of the above