Question

True False Questions 1. We can calculate the present value of perpetuity by dividing the annual...

True False Questions

1.

We can calculate the present value of perpetuity by dividing the annual cash inflow by the required
interest rate.

2.

Capital budgeting can be defined as analyzing alternative long-term investments and deciding which
which assets may be acquired.

3.

Limited funds being available for investment purposes is never a consideration in firm
making an investment decision..

4.

In the investment decision making process, the time value of money should be given
consideration..
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Homework Answers

Answer #1

Q-1) Ans- True

The formula to calculate the Present vlaue of perpetuity = Cash inflows/Interest Rate.

Q- 2) Ans- True

In Capital Budgeting we analyse different investmnet opportunities and choose the best suited opportunities for investment decision.

Q-3) Ans- False

In Capital Budgeting decision or Investment decision, the decision is analyized based on the Inflow and outflow of funds with Time value of money. Thus, Limited funds available is taken into consideration while making a decision.

Q-4) Ans- True

Without Time Value of money, true picture of investment decision can not be imagined as value of money always increases with time. Thus, Time value of money should be given consideration.

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