6. The capital budgeting decision model MOST CLOSELY RELATED to Net Present Value (NPV) Internal Rate of Return (IRR) Payback (PB) Profitability Index (PI) C verage Accounting Return (AAR 7. The LEAST USED and MOST UNRELIABLE capital budgeting decision methodology is C PAYBACK (PB) INTERNAL RATE OF RETURN (IRR AVERAGE ACCOUNTING RETURN (AAR) 8. C Which of the following is NOT TRUE about the PAYBACK decision methodology? It IGNORES the Time Value of Money It IGNORES Cash Flow AFTER the calculated payback period It is biased in favor of projects with BACK LOADED cash flows It is simple and easy to understand QUESTION 9 The term "crossover rate" means: C The rate of returns on two mutually exclusive projects The reinvestment rate assumption in IRR calculations The discount rate which makes the NPVs of two projects equal to 0 The discount rate which makes the NPVs of two projects equal to each other QUESTION 10 1. Which of the following statements is TRUE? NPV has no serious flaws and is the preferred Capital Budgeting decision technique IRR and NPV rarely given the same/accept decision for a particular project. The primary flaw of the Discounted Payback (DPB) technique is that it overvalues Cash Flows which occur after the standard Payback (PB) period. Modified Internal Rate of Return (MIRR) is used only when there are AT LEAST THREE sign changes for Project Cash Flows