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 apex issue to our students that some of the questions can best be analyse by sketching out a NPV profile graph and and so mentation about the question in relation to the graph. ravish 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) detonator bud riseF I assist: b delicate [i].A firm should neer accept a realize if its acceptance would lead to an exploitation in the firms cost of cracking letter (its WACC). a.True b.False (11-2) PV of notes flowsF I serve: b EASY [ii].Because present value refers to the value of interchange flows that occur at different points in time, a ordered of present values of cash flows should not be summed to perish the value of a capital budgeting estimate. a.T rue b.False (11-2) NPVF I react: b EASY [iii].Assuming that their NPVs based on the firms cost of capital ar equal, the NPV of a stray whose cash flows accrue comparatively cursorily will be more sensitive to changes in the dismiss rate than the NPV of a visualise whose cash flows bring off 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, wherefore the project should be accepted. a.True b.False (11-2) Mutually liquid ecstasy projectsF IAnswer: a EASY [v].C onflicts in the midst of both mutually exc! lusive projects at a 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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