1. True or False Opportunity costs are relevant to the capital budgeting decision.

2. True or False Accrual basis income and cash basis income are often the same amount for each period.

6. True or False Trend analysis is a form of sales forecasting where potential customers are studied.

21. True or False Assuming the same risk, the present value of $100 per year forever is greater than the present value of $100 the first year and growing a 4% forever thereafter.

22. True or False Internal rate of return is the preferred method to adjust for unequal lives.

23. True or False The net present value measures an investments total contribution to shareholder wealth while the profitability index measures wealth creation per dollar invested.

24. True or False The investment with the highest equivalent annuity will have the highest net present value of total cash flows if all competing investments are repeated to infinity or to a comparable time horizon at which the lives of all competing investments end.

25. True or False XYZ Company is comparing a 10 year project with a 20 year project. When calculating an equivalent annuity for the project with a 10 year life, XYZ should calculate the present value of the project and divide this NPV by the annuity factor (PVIF) for 20 years.

26. True or False Failure to recognize potential increases in indirect costs will lead to an under-estimation of the projects profitability.

27. True or False All single amount problems involve finding either-- the present value, the future value, the rate of return, or the number of periods.

28. True or False Annuity dues are constant and consistent payments that occur at the beginning of the investment period.

29. True or False Businesses in highly competitive markets typically have a positive accounting profit and but not a positive economic profit.

30. True or False Competitive advantage is the elimination of some of the conditions for perfect competition so that economic profit is possible.

31. True or False Capital budgeting much like strategic planning begins with the establishing of goals.

32. True or False To continue delivering their missions, many non-profit organizations (while working for social causes) seek to maintain or increase wealth as if they were profit seeking businesses.

33. True or False It is uncommon for different stages of the value chain (from the purchase of raw materials, producing the product, to selling the product) to be performed in different part of the world.

34. True or False A payback period of 6 is better than a payback period of 4

35. True or False Sunk costs are associated with past expenditures and are therefore relevant to the capital budgeting decision.

36. True or False A profitability index of 1.4 is better than a profitability index of 1.6 (all other variables the same)

37. True or False An IRR of 14% is better than an IRR or 12% (all other variables the same)