PART L:8 TRUE/FALSE QUESTIONS ( 1 6%) at 1) A major disadvantage of the NPV mode

Question

PART L:8 TRUE/FALSE QUESTIONS ( 1 6%) at 1) A major disadvantage of the NPV model is that if fails to take into account TVM. True or False? 2) The depreciation expense is subtracted from the NI of a company to find the operating cash flow. True or False? 3) Capital budgeting is at the heart of corporate finance because it is concerned with making the best choices about project selection. True or False? 4) The payback period method (PB) is a modification of the NPV to produce the ratio of the PV of the future cash inflows to the PV of the costs. True or False? 5) The discounted payback PB method is economically sound and properly ranks 6) The discounted PB method does not account for the cash flows after the recovery 7) The MIRR model assumes that subsequent cash flows from the project are 8) The NPV profile for a project is a graph showing NPVs at various discount rates. projects across various sizes, time horizons. True or False? of the initial outlay. True or False? reinvested at the IRR of the project. True or False? True or False?

Explanation / Answer

Question 1 a major Disadvantage of NPV model is that it fails to take into account TVM Answer is False Net present Value model considers and taken ito account time value of money Question:2 The depreciation expenses are Substracted from the net income to find net Operating cash flow Answer is false In computing Net Operating cash flows , depreciation is added to the net income of the company Question no:3 Capital Budget is the heart of the corporate finance because it concerned with making best decisions about project selection Answer is " True yes, capital Budget is used to make decisions regarding projects and rank them accoring to their Profitablitiy Questions :4 the payback period method is a modification of the Net present value to produce the ratio of Present Value of the future cash inflows to the Present Value of costs Answer is " True" Discounted payback period meethod is Modification of net present value method Pay back period = Present value of Future cash inflows/ present Value of cash outflows

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