Financial Management_NPV

Capital budgeting decisions involve a minimum time horizon of five years.

• TRUE

• FALSE

The payback method is very basic but it gives the user an understanding of when the cost of the initial project will be completely paid off.

• TRUE

• FALSE

The payback method is not really a theoretically correct approach.

• TRUE

• FALSE

A rapid payback may be important to firms having rapid technological development.

• TRUE

• FALSE

Using the payback method can be appropriate when the time value of money is considered.

• TRUE

• FALSE

With non-mutually exclusive events and no capital rationing, we will usually arrive at the same conclusions using either the net present value or internal rate of return methods.

• TRUE

• FALSE

The internal rate of return is the interest rate that equates the cash outflows of an investment with the subsequent cash inflows.

• TRUE

• FALSE

The net present value primary advantage over the internal rate of return method is that it does not require the time value of money calculations that the internal rate of return requires.

• TRUE

• FALSE

Non-mutually exclusive alternatives can be accepted at the same time.

• TRUE

• FALSE

The selection of a mutually exclusive project means that all other projects with a positive net present value may also be selected.

• TRUE

• FALSE