Question

- Which of the following statements is INCORRECT regarding
capital budgeting tools?
- If the NPV is positive, the Profitability Index must be greater than 1.
- If the IRR is greater than the required return, then the NPV will be positive.
- The discounted payback period will always be smaller than the payback period.
- The NPV is the best capital budgeting tool, as a general rule.

Answer #1

c.The discounted payback period will always be smaller than the payback period.

Discounted payback period will always be longer thant the payback period.

SInce the discounted cash flows will be smaller than the undiscounted cashflows, the discouted payback period will be longer than the simple payback period.

IF NPV is positive PI will be greater than 1.

If IRR is greater than the required return then the NPV will be positive.

The NPV is most preferred capital budgeting tool, as a general rule.

1)
If the NPV of a project with one sign reversal is positive, then
its IRR:
Select one:
a. must be greater than the required rate of return
b. must be less than the required rate of return
c. could be greater or less than the required rate of return
d. cannot be determined without actual cash flows
2)
Which of the following statements is INCORRECT?
Select one:
a. An acceptable project should have an NPV greater than or
equal...

which of the following capital budgeting rules does not use the
time value of money concept?
a) NPV
b) IRR
c) the discounted payback period
d) the profitability index
E) the payback period
Please explain why
Thank you

Which of the following is statements related to capital
budgeting is not true? A project is considered acceptable if its
NPV is greater zero. A project whose NPV is greater than its IRR is
should be accepted. Both the NPV method and the IRR method of
evaluating capital investment projects are widely considered to be
superior to the payback method. An NPV of zero signifies that the
project's cash flows are just sufficient to repay the invested
capital and to...

1) Capital budgeting is the process of analyzing potential
projects. What does net present value (NPV) represent in capital
budgeting analysis? How does NPV compare to internal rate of return
(IRR); specifically, what makes them similar and different? What
functional flaw exists in the discounted payback period calculation
that makes this capital budgeting tool suspect?

Question text
Which of the following statements is INCORRECT?
Select one:
a. When choosing between mutually exclusive projects, managers
should accept all projects with IRRs greater than the weighted
average cost of capital.
b. For independent projects, the decision to accept or reject
will always be the same using either the MIRR method or the NPV
method.
c. One of the disadvantages of choosing between mutually
exclusive projects on the basis of discounted payback method is
that you might choose...

) Which if the statements below describes the correct capital
budgeting decision rule? a) Reject a project if the cost of capital
exceeds the IRR. B) Reject a project if the cost of capital is less
that the NPV. C) Accept a project if the NPV is greater than the
IRR. D) Accept a project if the cost of capital is greater that the
NPV.

With respect to the capital budgeting practices of large U. S.
corporations: Answer A the profitability index has been gaining in
popularity. B IRR and NPV have been gaining in popularity. C.
payback and discounted payback have been gaining in popularity. D.
IRR and NPV have declined in popularity

ESSAY TOPIC:
Topic: Capital Budgeting Decision Making Tools (IRR, NPV, PI,
PB). What do managers and academics prefer? What are the capital
budgeting practices that are followed in the industry (ie how do
Managers take Capital Budgeting Decisions? Using which tool/tools
mostly?) Is there a
“better” / more preferred tool according to managers &
academics?

Tom just got out of a meeting with felicity in which they
discussed a capital budgeting project they are evaluating for the
company. Tom's mind was not focused on the meeting, so all he can
remember is that Felicity used one of the time value of money
techniques mentioned in the book to evaluate the project and that
she concluded the project should be purchase. based on this
information, which of the following statements must be correct?
A. The projected...

Rank the following capital budgeting techniques in order of
importance: Payback, Discounted Payback, IRR, NPV and MIRR. Why
does this order make sense?

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