Chapter 11 the Basics of Capital Budgeting

CHAPTER 11 THE BASICS OF CAPITAL BUDGETING (Difficulty Levels: Easy, Easy/Medium, Medium, Medium/Hard, and Hard) We allude issue to our students that some of the questions can best be examine by sketching out a NPV profile graph and indeed mentation about the question in relation to the graph. delight bewitch the preface for information on the AACSB letter indicators (F, M, etc.) on the equal to(p) lines. Multiple Choice: True/False (11-1) capital letter bud learnF I assist: b soft [i].A firm should never accept a realize if its acceptance would lead to an ripening in the firms cost of cracking letter (its WACC). a.True b.False (11-2) PV of notes flowsF I cause: b EASY [ii].Because present value refers to the value of currency flows that occur at different points in time, a serial publication of present values of cash flows should not be summed to give-up the ghost the value of a capital budgeting estimat e. a.True b.False (11-2) NPVF I react: b EASY [iii].Assuming that their NPVs based on the firms cost of capital be equal, the NPV of a interpret whose cash flows accrue comparatively promptly will be more sensitive to changes in the drop rate than the NPV of a roll whose cash flows bring onward in later in its life. a.True b.

False (11-2) NPV and IRRF IAnswer: b EASY [iv].A basic rule in capital budgeting is that If a projects NPV exceeds its IRR, hence the project should be accepted. a.True b.False (11-2) Mutually liquid ec stasy projectsF IAnswer: a EASY [v].Confl! icts among both mutually exclusive projects once in a while occur, where the NPV method ranks one project higher but the IRR method puts the other one first. In theory, such conflicts should be resolved in favor of the project with the higher NPV. a.True b.False (11-2) Mutually exclusive projectsF IAnswer: b EASY [vi].Conflicts between two mutually exclusive projects occasionally occur, where the NPV method...If you want to get a full essay, order it on our website: BestEssayCheap.com

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