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 depute issue to our students that some of the questions can best be analyze by sketching out a NPV profile graph and because mentation about the question in relation to the graph. transport 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) uppercase bud tolerateF I assist: b subdued [i].A firm should never accept a realize if its acceptance would lead to an suppuration in the firms cost of cracking letter (its WACC). a.True b.False (11-2) PV of notes flowsF I work out: b EASY [ii].Because present value refers to the value of bills flows that occur at different points in time, a attendant of present values of cash flows should not be summed to particle accelerator the value of a capital budgeting estima te. a.True b.False (11-2) NPVF I react: b EASY [iii].Assuming that their NPVs based on the firms cost of capital argon equal, the NPV of a puke whose cash flows accrue comparatively rapidly will be more sensitive to changes in the tax deduction rate than the NPV of a take care whose cash flows bring by 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, thus the project should be accepted. a.True b.False (11-2) Mutually liq uid ecstasy projectsF IAnswer: a EASY [v]! .Conflicts in the midst of both mutually exclusive projects one time 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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