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Conclusions about capital budgeting The decision process Before making capital budgeting decisions, finance professionals often generate, review, analyze, select, and implement long - term investment
Conclusions about capital budgeting
The decision process
Before making capital budgeting decisions, finance professionals often generate, review, analyze, select, and implement longterm investment
proposals that meet firmspecific criteria and are consistent with the firm's strategic goals.
Companies often use several methods to evaluate the project's cash flows and each of them has its benefits and disadvantages. Based on your
understanding of the capital budgeting evaluation methods, which of the following conclusions about capital budgeting are valid? Check all that apply.
For most firms, the reinvestment rate assumption in the NPV is more realistic than the assumption in the IRR.
Because the MIRR and NPV use the same reinvestment rate assumption, they always lead to the same acceptreject decision for mutually
exclusive projects.
The NPV shows how much value the company is creating for its shareholders.
True or False: Sophisticated firms use only the NPV method in capital budgeting decisions.
False
True
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