1. Which of the following statements regarding capital budgeting analysis is correct?

NPV assumes reinvest at IRR.

IRR assumes reinvest at the opportunity cost of capital.

Reinvest at IRR is more realistic, so NPV method is the best.

16. Which of the following statements about dividend is NOT true?

		Bird-in-the-hand theory says that investors think dividends are less risky than potential future capital gains, so they like dividends.
		Tax preference theory indicates that low dividend payments mean higher capital gains. Capital gains taxes are lower than dividend taxes, and they can be deferred. So investors prefer low-dividend-payments or non-dividend-payments firms.
		Based on the Bird-in-the-hand theory, a firm should set high dividend payout ratio to increase firm value.
		Based on the Tax preference theory, a firm should pay more dividends to increase firm value.

None of the above statements is correct.

4. Which of the following statements is not correct?

		The higher the sales growth rate g is, the larger AFN will beother things held constant.
		The higher the capital intensity ratio, the larger AFN will beother things held constant.
		The higher the firms spontaneous liabilities, the smaller AFN will beother things held constant.
		The higher the payout ratio, the smaller AFN will be if other things held constant.

5. Which of the following assumptions is assumed in the percent of sales forecasting method?

		All balance sheet assets accounts are tied directly to sales.
		Accounts receivables and inventory are tied directly to sales.
		Preferred stock and long-term debt are tied directly to sales.
		Fixed assets, but not current assets, are tied directly to sales.