The IRR decision criterion is to accept a project if the IRR exceeds the desired or required return rate and to reject the project if the IRR is less than the desired or required rate of return. Indicate whether the statement is true or false. ANSWER Answer: TRUE
Date: September 19th, 2020
The IRR is an unpopular capital budgeting decision model because even with the advent of calculators and spreadsheets, the cumbersome calculation remains. Indicate whether the statement is true or false. ANSWER Answer: FALSE Explanation: The IRR is very popular because with the advent of calculators and spreadsheets the cumbersome calculation is a thing […]
Date: September 19th, 2020
The most popular alternative to NPV for capital budgeting decisions is the ________ method. A) internal rate of return (IRR) B) payback period C) discounted payback period D) profitability index ANSWER Answer: A
Date: September 19th, 2020
Two projects intersect, in terms of NPV, at a discount rate labeled the ________. A) crossover rate B) internal rate of return C) discount rate D) yield to maturity ANSWER Answer: A
Date: September 19th, 2020
Which of the following assumptions of an ideal (or perfect) capital market most closely relates to the assumed symmetry of information set shared by all firms and all investors? a. Capital Markets are frictionless b. Homogeneous expectations c. Atomistic competition d. The firm has a fixed investment program e. Once chosen, the firm’s financing is […]
Date: September 19th, 2020
The Internal Rate of Return (IRR) Model suffers from three problems. Which of the below is NOT one of these problems? A) Comparing mutually exclusive projects B) Cumbersome computations not resolvable by the latest technology C) Incorporates the IRR as the reinvestment rate for the future cash flows D) Multiple IRRs ANSWER Answer: […]
Date: September 19th, 2020
Debt capital is less risky than equity capital because a firm is legally obligated to pay interest to bondholders but they are not legally obligated to pay dividends to preferred or common stockholders. Indicate whether the statement is true or false ANSWER TRUE
Date: September 19th, 2020
A ________ agreement normally states the exact conditions and procedures for the purchase of an account. A) factoring B) pledging accounts receivable C) revolving credit D) line of credit ANSWER A
Date: September 19th, 2020
Which of the statements below describes the IRR decision criterion? A) The decision criterion is to accept a project if the IRR falls below the desired or required return rate. B) The decision criterion is to reject a project if the IRR exceeds the desired or required return rate. C) The decision criterion is to […]
Date: September 19th, 2020
The hurdle rate should be set so that it reflects the proper risk level for the project. If we have to choose between two projects with similar risk and therefore similar hurdle rates, we would select the project that ________. A) has a higher internal rate of return B) has a lower internal rate of […]
Date: September 19th, 2020
