All other things remaining the same, when the interest rate used to discount future values increases, present values

a. Decrease.

b. Increase in proportion to the interest rate increase.

c. Remain the same.

d. Increase but not in proportion to the interest rate increase.

Blaine Company is considering four investment proposals, each requiring the same amount of initial cash investment. The excess present value index for each proposal is listed below. Using the index as a selection criterion, identify the index of the most attractive proposal.

a. 90

b. 100

c. 110

d. 115

The primary limitation of the cash payback method is that it

a. Uses before-tax cash flows.

b. Identifies the length of time it will take to recover the investment outlay in cash.

c. Ignores the profitability of one investment project as compared to another.

d. Involves a more sophisticated analysis than the net present value method.

Which of the following is not one of the considerations given to capital budgeting proposals?

Select one:

A. Whether there is an immediate need to replace or repair critical assets

B. Whether the proposal is in compliance with capital budgeting policies

C. Whether the proposal would meet the established minimum return on capital

D. Whether the proposal is congruent with the firm's long-term goals

E. All of the above are considerations given to capital budgeting proposals

Which of the following is a potential source of capital for a company to invest in long-term assets?

Select one:

A. Bank loans

B. Net Income from past years

C. Issuing additional common stock

D. Issuing bonds

E. All of the above

The time value of money dictates that money received today will be worth ______ in the future than it is worth today?

Select one:

A. It depends on the discount.

B. Less

C. More

D. The Same

If the cash method of accounting is used rather than the accrual method, which of the following adjustments must be made to Net Income to arrive at after-tax cash flows?

Select one:

A. Change in Accounts Receivable

B. Change in Accounts Payable

C. Change in Expense Liability accounts

D. Depreciation expense

E. None of the above

The Cash Payback Method:

Select one:

A. Is preferable to the Net Present Value method for evaluating relative profitability

B. Considers discounted cash flow

C. Reflects the total life of the investment project

D. Includes calculations of depreciation tax shields

E. None of the above