Quiz Ch 08 – T/F Payback Period and NPV Equilibrium
Fundamentals of Corporate Finance
Brealey, Myers, and Marcus
10th Edition
True or false: The payback period of a project represents the duration required to reach an NPV equilibrium of zero.
True or false: The payback period of a project represents the duration required to reach an NPV equilibrium of zero.
True or false: Discounted cash-flow analysis is, indeed, the primary tool for project evaluation for most managers.
True or false: In the case of mutually exclusive projects, the correct choice is the project with the higher IRR.
True or false: The choice between mutually exclusive projects of comparable lifespans becomes more straightforward thanks to the NPV rule. Whenever there’s a project with a positive NPV, the one with the highest NPV becomes the obvious pick.
True or false: Soft rationing should ideally NOT impose any costs on the firm.
True or false: The payback method is rarely employed in contemporary corporate financial analysis due to its shortcomings.
True or false: The payback rule establishes that a project is considered viable if the invested capital is recouped within a specified period.
True or false: The payback rule consistently ensures that shareholders are in a better financial position.
True or false: For numerous firms, the constraints on capital funds are ‘soft,’ signifying that investors do NOT enforce capital rationing.
True or false: When dealing with projects of different durations and distinct initial investments, the equivalent annual cost method is a valuable tool for comparison.