BUSI 530 Chapter 9 questions with 100%
complete solutions already passed
In capital budgeting, the net ______ determines the value of a project to the company. - correct
answer ✔✔Present Value
If NPV is positive, the project should be ______. - correct answer ✔✔Accepted
If NPV is negative, the project should be _______. - correct answer ✔✔Rejected
3 attributes of NPV are that it: - correct answer ✔✔uses all the cash flows of a project, uses
cash flows, & discounts the cash flows properly.
Length of time until the sum of the discounted cash flows is equal to the initial investment. -
correct answer ✔✔Discounted payback period
Capital budgeting method allows lower management to make smaller, everyday financial
decisions effectively. - correct answer ✔✔Payback method
Weaknesses of the payback method - correct answer ✔✔cash flows received after the payback
period are ignored, time value of money principles are ignore, cutoff date is arbitrary
Capital budgeting decision method finds the present value of each cash flow before calculating a
payback period - correct answer ✔✔Discounted payback period
Discounted payback rule has an objective benchmark to use in decision making. True/False -
correct answer ✔✔False
, Payback period tells the time it takes to break even in an _________ sense. - correct answer
✔✔Accounting
Discounted payback period tells the time it takes to break even in an _______or financial sense.
- correct answer ✔✔Economic
When cash flows are conventional, NPV is ______. - correct answer ✔✔Positive for discount
rates below the IRR, equal to zero when the discount rate equals the IRR, and negative for
discount rates above the IRR.
The IRR rule can lead to bad decisions when _____ or ______. - correct answer ✔✔Projects are
mutually exclusive, cash flows are not conventional.
The point at which the NPV profile crosses the horizontal axis is the: - correct answer
✔✔Internal Rate of Return
Mutually exclusive investment decisions - correct answer ✔✔a situation in which taking one
investment prevents the taking of another.
Mutually exclusive investments - correct answer ✔✔2 different choices for the assembly lines
that will make the same product, & a restaurant or gas station on the same piece of land.
Weaknesses of Discounted payback period - correct answer ✔✔Arbitrary cutoff date, exclusion
of some cash flows, and loss of simplicity as compared to the payback method
When cash flows are conventional, NPV is ________ if the discount rate is above the IRR. -
correct answer ✔✔Negative
complete solutions already passed
In capital budgeting, the net ______ determines the value of a project to the company. - correct
answer ✔✔Present Value
If NPV is positive, the project should be ______. - correct answer ✔✔Accepted
If NPV is negative, the project should be _______. - correct answer ✔✔Rejected
3 attributes of NPV are that it: - correct answer ✔✔uses all the cash flows of a project, uses
cash flows, & discounts the cash flows properly.
Length of time until the sum of the discounted cash flows is equal to the initial investment. -
correct answer ✔✔Discounted payback period
Capital budgeting method allows lower management to make smaller, everyday financial
decisions effectively. - correct answer ✔✔Payback method
Weaknesses of the payback method - correct answer ✔✔cash flows received after the payback
period are ignored, time value of money principles are ignore, cutoff date is arbitrary
Capital budgeting decision method finds the present value of each cash flow before calculating a
payback period - correct answer ✔✔Discounted payback period
Discounted payback rule has an objective benchmark to use in decision making. True/False -
correct answer ✔✔False
, Payback period tells the time it takes to break even in an _________ sense. - correct answer
✔✔Accounting
Discounted payback period tells the time it takes to break even in an _______or financial sense.
- correct answer ✔✔Economic
When cash flows are conventional, NPV is ______. - correct answer ✔✔Positive for discount
rates below the IRR, equal to zero when the discount rate equals the IRR, and negative for
discount rates above the IRR.
The IRR rule can lead to bad decisions when _____ or ______. - correct answer ✔✔Projects are
mutually exclusive, cash flows are not conventional.
The point at which the NPV profile crosses the horizontal axis is the: - correct answer
✔✔Internal Rate of Return
Mutually exclusive investment decisions - correct answer ✔✔a situation in which taking one
investment prevents the taking of another.
Mutually exclusive investments - correct answer ✔✔2 different choices for the assembly lines
that will make the same product, & a restaurant or gas station on the same piece of land.
Weaknesses of Discounted payback period - correct answer ✔✔Arbitrary cutoff date, exclusion
of some cash flows, and loss of simplicity as compared to the payback method
When cash flows are conventional, NPV is ________ if the discount rate is above the IRR. -
correct answer ✔✔Negative
