Which of the following statement about the payback period method for capital budgeting decisions is not correct? The payback period method ignores the time value of money. A shorter payback period does not always mean that one investment is more desirable than another. When the annual net cash inflow is the same each year, the payback period = Investment required/Annual net cash inflow. When the net cash flows change from year to year, the payback period = Investment required/Average net cash inflow per year.

To calculate net present value of a project with normal cash flows, find the present value of the expected cash flows, and subtract A)  retained earnings.   B)  the cost of the investment.   C)  the factor loading.   D)  the payback period.

What capital budgeting rule is a simple but imperfect attempt to solve the capital rationing problem?  a The profitability index  b The accounting rate of return  c The payback rule  d The internal rate of return  e The net present value rule

Which investment criteria answers the question: "How quickly do we recover our investment, in nominal dollars?" A) net present value B) internal rate of return C) profitability index D) payback period

Which of the following statements is false with respect to the simple rate of return? Multiple Choice The annual Iincremental net operating Income Included in the numerator should Include the Incremental revenues that result from making the Investment. The InItlal Investment Included In the denominator should Include the cash outlay assoclated with that Investment. The Initlal Investment Included In the denominator should be reduced by the salvage value of the new equlpment. The annual incremental net operating Income Included In the numerator should be reduced by the depreclation charges that results from making the Investment.

Which of the following statements is FALSE? A. When evaluating a capital budgeting decision, we generally include interest expense. B. Only include as incremental expenses in your capital budgeting analysis the additional overhead expenses that arise because of the decision to take on the project. C. Many projects use a resource that the company already owns. O D. As a practical matter, to derive the forecasted cash flows of a project, financial managers often begin by forecasting earnings.

Why does WACC increase and IRR decrease as the capital budget increases? Are there any steps management can take to reverse these trends?

QUESTION #1: Which of the following is a disadvantage of using the IRR method of capital budgeting over other types:   A- IRR does not consider the time and value of money.   B- IRR assumes reinvestment of project cash flows at the same rate as the IRR   C- IRR ignores the prudent simplicity of paybacks   D- None of the above   QUESTION #2: The net present value (NPV) of an investment is___________.   A- The present value of all benefits (cash inflows)   B- The present value of all costs (cash outflows) of the project   C- The present value of all benefits (cash inflows) minus the present value of all costs (cash outflows) of the project   D- The present value of all benefits (cash outflows) minus the present value of all costs (cash inflows) of the project

What two pieces of information does the payback method providethat are absent from the other capital budgeting decision methods?

When the underlying riskiness of free cash flows (FCF) decreases, the value of the project O increases stays the same decreases