1.Which of the following is a capital budgeting method?

a. net present value

b. return on assets

c. inventory turnover

d. return on equity

2.The payback method provides management with valuable information about the time period in which the cash invested will be recouped.

True or False

3. Which of the following describes the time value of money?

a. Money loses it purchasing power over time through inflation.

b. A dollar received today is worth more than a dollar to be received in the future.

c. The time value of money has no effect on the timing of capital investments.

d. The fact that invested cash may not earn interest over time is called time value of money.

4. Which of the following is a capital budgeting method that ignores the time value of money?

a. return on assets

b. internal rate of return

c. net present value

d. payback

5.First Choice Carpets is purchasing new weaving equipment at $720,000. It is estimated that the equipment will generate cash inflows as follows.

Year 1 $206,000

2 $206,000

3 $256,000

4 $256,000

5 $162,000

Considering the residual value is zero, what is the payback period

a. 3.50 yrs

b. 4.49 yrs

c. 3.76 yrs

d. 3.20 yrs