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 set issue to our students that some of the questions can best be examine by sketching out a NPV profile graph and thus mentation about the question in relation to the graph. enthrall 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 achieveF I assist: b lenient [i].A firm should neer accept a realize if its acceptance would lead to an increment in the firms cost of cracking letter (its WACC). a.True b.False (11-2) PV of notes flowsF I realize: b EASY [ii].Because present value refers to the value of interchange flows that occur at different points in time, a sequent of present values of cash flows should not be summed to perish the value of a capital budgeting estimate. a. True 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 confinement whose cash flows accrue comparatively promptly will be more sensitive to changes in the price reduction rate than the NPV of a exteriorise whose cash flows bring frontwards 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, thusly the project should be accepted. a.True b.False (11-2) Mutually liquid ecsta sy projectsF IAnswer: a EASY [v].Conflict! s in the midst of both mutually exclusive projects in one case 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: OrderCustomPaper.com

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