______ 10. If a capital budgeting opportunity has a negative “Net Present Value”
ID: 2800800 • Letter: #
Question
______ 10. If a capital budgeting opportunity has a negative “Net Present Value”
(NPV) based on the firm’s “Weighted Average Cost of Capital”
(WACC), the investment should be made.
______ 11. An advantage of the payback period method of capital budgeting is
that it can be used to compare investments that have unequal
initial costs.
______ 12. Projects having a payback period lower than the specified cut-off
point should be rejected.
______ 13. For tax purposes, a business may use accelerated depreciation methods.
______ 14. In a capital budgeting analysis, the cost of new equipment should exclude
the cost of installation in the analysis.
______ 15. An “irrevocable trust” is one in which the trustor has the right to cancel
the trust during his or her life time.
______ 16. “Collectibles” are items that become valuable or appreciate with time
because of their scarcity.
______ 17. “Commercial real estate” includes both land and improved property
that is used by the owner to generate income.
______ 18. “Load” mutual funds do not charge commissions on the amount invested
and have no sales charges when the shares are sold by their owner.
Explanation / Answer
10. If a capital budgeting opportunity has a negative “Net Present Value” (NPV) based on the firm’s “Weighted Average Cost of Capital” (WACC), the investment should be made. = FALSE
11. An advantage of the payback period method of capital budgeting is that it can be used to compare investments that have unequal initial costs. = TRUE
12. Projects having a payback period lower than the specified cut-off point should be rejected. = FALSE
13. For tax purposes, a business may use accelerated depreciation methods. = TURE
14. In a capital budgeting analysis, the cost of new equipment should exclude thecost of installation in the analysis. = FALSE
15. An “irrevocable trust” is one in which the trustor has the right to cancel the trust during his or her life time. = TURE
16. “Collectibles” are items that become valuable or appreciate with time because of their scarcity. TRUE
17. “Commercial real estate” includes both land and improved propertythat is used by the owner to generate income. = True
18. “Load” mutual funds do not charge commissions on the amount invested and have no sales charges when the shares are sold by their owner. = FALSE
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