Quiz Ch 08 – T/F Incorporating Cash Flows in the Payback Period
Fundamentals of Corporate Finance
Brealey, Myers, and Marcus
10th Edition
True or false: The payback period takes into consideration all the cash flows associated with a project.
True or false: The payback period takes into consideration all the cash flows associated with a project.
True or false: In cases where a project yields multiple IRRs, the lowest IRR is NOT a valid indicator.
True or false: The IRR represents the rate of return on the investment’s cash flows and is also synonymous with the opportunity cost of capital.
True or false: In the trial-and-error process of calculating IRR, it is typically advisable to increase discount rates when NPV is positive.
True or false: Choosing projects based on NPV, unlike IRR, ensures a consistently accurate accept-reject decision.
True or false: The payback period of a project represents the duration required to reach an NPV equilibrium of zero.
True or false: In the process of project selection using a profitability index, a high value is favored over a low value.
True or false: Discounted cash-flow analysis is, indeed, the primary tool for project evaluation for most managers.
True or false: The shareholder wealth is reduced by the project’s cost in an NPV of zero result projects.
True or false: A decrease in the opportunity cost of capital leads to an increase in the net present value of a project.