1. An acceptable project should have a NPV > 0 and PI > 1. 2. The NPV profile cl
ID: 1234375 • Letter: 1
Question
1. An acceptable project should have a NPV > 0 and PI > 1.2. The NPV profile clearly demonstrates that the NPV of a project increases as the discount rate increases.
3. In measuring cash flow, we are interested in only incremental or incremental after tax cash flows that are attributed to the investment proposal being evaluated.
4. The cost of internal common equity is already on an after tax basis, since dividends paid to common stockholders are not tax deductible.
5. If a bond sells for par value, the coupon interest rate and YTM are equal.
6. Bond prices are inversely related to market interest rates.
7. Proffered stock has priority over common stock with respect to its claims on income for dividends.
8. In general, a project
Explanation / Answer
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F. As I goes up, the gain from future stuff goes down.
T. we don't care about fixed costs
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F. because we can use it for tax purposes.
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