Under which one of the capital budgeting, projects is the sum of all present values of all cash inflows minus present value of outflows? а. Post payback period b. Payback period С. Internal rate of return d. Net present value method When evaluating a proposed project under capital budgeting by the net present value method, if the NPV negative, the proposal is should be rejected. Select one: True False

Under which one of the capital budgeting, projects is the sum of all present values of all cash inflows minus present value of outflows? а. Post payback period b. Payback period С. Internal rate of return d. Net present value method When evaluating a proposed project under capital budgeting by the net present value method, if the NPV negative, the proposal is should be rejected. Select one: True False

Corporate Fin Focused Approach

5th Edition

ISBN:9781285660516

Author:EHRHARDT

Publisher:EHRHARDT

Chapter10: The Basics Of Capital Budgeting: Evaluating Cash Flows

Section: Chapter Questions

Problem 1Q

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Which of the following is not a capital budgeting technique? Select one: a. Net present value b. Discounted Payback period c. Payback Period d. Profitability index e. Ratio Analysis Which capital budgeting projects are preferred? Select one: a. Lower payback period b. None of the option c. Higher payback period d. Lower cash inflow projects e. Average payback period
Which of the following statement is correct Select one: a. A project is accepted when profitability index will be greater than one b. All statements are correct c. A project is accepted when net present value is greater than zero d. A project is accepted when payback period is less than the other project
For capital budgeting projects, which of the following statements is CORRECT? Group of answer choices An extremely high required rate of return should be used to find the NPV of a relatively low risk project. All of these answer choices are correct. If a project’s NPV is less than zero, then its IRR must be less than the required rate of return. If a project’s NPV is greater than zero, then its IRR must be less than zero. The lower the required rate of return, the lower the calculated NPV.
A. MULTIPLE CHOICE: Analyze the following questions and choose among the options which you think is the correct answer. Write the letter of your choice. (2 1. Which of the following capital budgeting techniques ignores the time value of money? (a) Payback. (b) Net present value. 2. Which of the following statements is false? (a) If the payback period is less than the maximum acceptable payback period, accept the project. (b) If the payback period is greater than the maximum acceptable payback period, reject the project. (c) If the payback period is less than the maximum acceptable payback period, reject the project (d) Two of the above. 3. Should Pharms company accept a new project if its maximum payback is 3.5 years and its initial cost is P5,000,000 and it is expected to provide operating cash inflows of P1,800,000 in year 1, P900,000 in year 2, P600,000 in year 3 and P1,800,000 in year 4? (а) Yes. (b) No. 4. What is the NPV for the following project if its cost of capital is 15…
Which capital budgeting projects are ?preferred اخترأحد الخیارات a. Higher payback period O b. None of the option O c. Average payback period O d. Lower payback period O e. Lower cash inflow projects
Which of the statements below describes the correct capital budgeting decision rule? O A. Reject a project if the NPV is less than the IRR. O B. Accept a project if the cost of capital is more than the NPV. OC. Accept a project if the cost of capital exceeds the IRR. O D. Reject a project if the cost of capital is above the IRR.
When evaluating a project with non-normal cash flows (cash flows change sign for at least two times during the project life), the best method to use for capital budgeting analysis is the: internal rate of return payback rule discounted payback Modified internal rate of return (MIRR)
What is a capital budgeting technique that generates decision rules and associated metrics for choosing projects, based on the implicit, expected geometric average of a project's rate of return?
The general rule for using the weighted-average cost of capital (WACC) in capital budgeting decisions is to accept projects with: Select one: A. Expected rates of return that are positive B. Expected rates of return less than the WACC C. Expected rates of return greater than the WACC D. Actually, expected rates of return can be ignored
Examine the following statements. (i) Payback period method measure the true profitability of a project. (ii) Capital Rationing and capital budgeting mean the same thing. (iii) Internal Rate of Return and Time Adjusted rate of Return are the same thing. (iv) Rate of Return takes into account the time value of money. A. (i), (ii) and (iii) are correct. B. (ii) and (iii) are correct. C. Only (iii) is correct. D. All (i), (ii), (iii) and (iv) are false
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