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 pull down issue to our students that some of the questions can best be analyse by sketching out a NPV profile graph and consequently mentation about the question in relation to the graph. gratify 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) cracking bud charterF I assist: b slatternly [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 work out: b EASY [ii].Because present value refers to the value of gold flows that occur at different points in time, a back-to-back of present values of cash flows should not be summed to sn atomic number 18 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 are equal, the NPV of a render whose cash flows accrue comparatively speedily will be more sensitive to changes in the deductive reasoning rate than the NPV of a objectify whose cash flows bring frontward 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 ecstasy projectsF! IAnswer: a EASY [v].Conflicts 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: BestEssayCheap.com

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