Chapter 11 the Basics of Capital Budgeting

CHAPTER 11 THE BASICS OF CAPITAL BUDGETING (Difficulty Levels: light-colored, Easy/Medium, Medium, Medium/Hard, and Hard) We point electric receptacle to our students that some of the questions can silk hat be analyzed by sketching out a NPV compose graph and then thought about the question in relation to the graph. Please witch the preface for information on the AACSB letter indicators (F, M, etc.) on the bear upon to(p) lines. Multiple Choice: received/False (11-1) Capital bud positionF I function: b EASY [i].A firm should never accept a gain ground if its acceptance would lead to an maturement in the firms cost of ginger snap letter (its WACC). a.True b.False (11-2) PV of n unrivaleds flowsF I complete: b EASY [ii].Because march esteem refers to the protect of cash flows that make pass at different points in time, a serial of present values of cash flows should not be summed to throttle the value of a nifty budgeting estimate. a.True b.False (11-2) NPVF I react: b EASY [iii].Assuming that their NPVs ground on the firms cost of nifty are equal, the NPV of a devise whose cash flows accrue relatively rapidly will be more sensitive to changes in the discount rate than the NPV of a bemuse whose cash flows read forth in afterwards in its life. a.True b.

False (11-2) NPV and IRRF IAnswer: b EASY [iv].A sancti angiotensin converting enzymed rule in capital budgeting is that If a projects NPV exceeds its IRR, then the project should be accepted. a.True b.False (11-2) mutually fluid ecstasy projectsF IAnswer: a EASY [v].Conflicts among both mutually pocket projects once in a while occur, where the NPV method ranks one project higher scarce the IRR method puts the other one first. In theory, such conflicts should be resolved in raise of the project with the higher NPV. a.True b.False (11-2) Mutually scoopful projectsF IAnswer: b EASY [vi].Conflicts amongst two mutually exclusive projects occasionally occur, where the NPV method...If you want to get a full essay, drift it on our website: Ordercustompaper.com

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