T/F Finance Questions 1. If a project is acceptable using the NPV criteria, it w

Question

T/F Finance Questions

1. If a project is acceptable using the NPV criteria, it will also be acceptable when using the profitability index and IRR criteria.

2. Free cash flows represent the benefits generated from accepting a capital-budgeting proposal.

3. If project A generates $10 million of free cash flow over its five year useful life and project B generates $8 million of free cash flow over its useful life, then Project A will have a shorter payback period than Project B, assuming both projects require the same initial investment.

4. The profitability index can be helpful when a financial manager encounters a situation where capital rationing is required.

5. The mutually exclusive project with the highest positive NPV will also have the highest IRR.

6. If a project is acceptable using the NPV criteria, it will also be acceptable when using the profitability index and IRR criteria.

Explanation / Answer

1. false

2.true

3.true

4.true

5.true

6.false

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