CF Quiz 1

Accept the project if:

• PI>1

• PI<1

• PI=1

Accept the project if:

• NPV>0

• NPV<0

• NPV=0

The discount rate (hurdle rate or return) must be determined in advance for the:

• Payback period methid

• Time adjusted rate of return method

• Internal rate of return method

• Net present value method

The difference between the total present value of a stream of cash flows at a given rate of discount and the initial capital outlay is known as the:

• Internal rate of return

• Rate of return

• Net present value

• Net profit

Capital budgeting decisions can be easily reversed.

• True

• False

In independent project, firm can select all feasible projects.

• True

• False

In mutually exclusive projects only one project can be selected.

• True

• False

Payback period technique is based on discounting technique.

• True

• False

In Net Present Value technique only cash inflows are discounted. Cash outflows are ignored.

• True

• False

Cash inflows are compounded for calculating Net Present Value.

• True

• False