The net present value method of capital budgeting assumes that cash flows are re

Question

The net present value method of capital budgeting assumes that cash flows are reinvested at what rate? The internal rate of return on the project. The rate of return on the company's debt The discount rate used in the analysis. A zero rate of return. If the net present value of a project is zero, based on a discount rate of 16%, which of the following statements about the project's internal rate of return is correct? It is equal to 16%. It is less than 16%. It is greater than 16%. It cannot be determined from the information given. Which one of the following statements about the payback method of capital budgeting is correct? The payback method does NOT consider the time value of money The payback method considers cash flows after the payback has been reached The payback method uses discounted cash flow techniques The payback method will lead to the same decision as other methods of capital budgeting.

Explanation / Answer

32.Internal rate of return.

33.It cannot be determined fromt the information.

34 The payback method uses discounted cash flow techniques.

35.

Therfore ayback period is 4 yrs.

Year Cash inflow Cumlative cash inflow 1 20000 20000 2 20000 40000 3 20000 60000 4 20000 80000

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