Conclusions about capital budgeting

The decision process

Before making capital budgeting decisions, finance professionals often generate, review, analyze, select, and implement long$-$term investment

proposals that meet firm$-$specific 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 accept$/$reject 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