1)A small, family-owned corporation would be more likely to use the contribution

Question

1)A small, family-owned corporation would be more likely to use the contribution-to-firm risk criteria rather than the systematic risk to evaluate capital budgeting projects. true or false

2)If the interest rate is positive, then the present value of an annuity due will be less than the present value of an ordinary annuity. true or false

3)Capital rationing generally leads to higher stock prices as management is doing the best job it can in selecting only the best capital budgeting projects. true or false

Explanation / Answer

1)A small, family-owned corporation would be more likely to use the contribution-to-firm risk criteria rather than the systematic risk to evaluate capital budgeting projects - TRUE

2)If the interest rate is positive, then the present value of an annuity due will be less than the present value of an ordinary annuity. - FALSE

3)Capital rationing generally leads to higher stock prices as management is doing the best job it can in selecting only the best capital budgeting projects.- FALSE

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