Quiz Ch 05 – T/F Limitations of the Payback Rule
Principles of Corporate Finance
Brealey, Myers, and Allen
13th Edition
True or false: The payback rule dismisses all cash flows that occur beyond the defined cut-off date.
True or false: The payback rule dismisses all cash flows that occur beyond the defined cut-off date.
True or false: For a loan project (borrowing), it is advisable to accept the project if the Internal Rate of Return (IRR) exceeds the cost of capital.
True or false: The profitability index for a project with a positive net present value is never negative.
True or false: The profitability index is consistently less than 1.
True or false: The denominator in the calculation of the Profitability Index represents the present value of the investment.
True or false: The book value of a project reflects its market valuation.
True or false: The internal rate of return for a project is influenced by its level of risk.
True or false: Soft rationing may be employed as a means to control managerial behavior.
True or false: There is only one unique value for the Internal Rate of Return (IRR) associated with any sequence of cash flows.
True or false: The value additivity property holds for present values.