Question
Hello, i need your help to solve the following true/false questions: 1)The payback periodi s used as a warning signal about a projects capacity to
Hello, i need your help to solve the following true/false questions:
1)The payback periodi s used as a warning signal about a projects capacity to generate cash flows into the distant future; Is that last statement true or false?
2)When using WACC to discount the annual cash flows of a project, we assume annual compounding; Is that last statement true or false?
3)If a firm uses a single cut-off period for all projects, it is likely to accept too many short lived projects; Is that last statement true or false?
4)A firm uses a payback rule with a three-year cutoff period. One disadvantage of that approach is the rule cannot distinguish between those projects that pay back a significant amount early within the three years payback period and those that do not. Is that last statement true or false?
5)The internal rate of return is the rate of return expected by those who provide capital for the business (debt and equity); Is that last statement true or false?
6)There are two ways the WACC is typically used. Senior leaders use it to evaluate individual investments and investrors use it to assess the value of the firm; Is that last statement true or false?
7)An investor/speculator has bought protection on 1 million at 343 basis points with CDS on Company A. She expects that price to reach 500 basis points soon. Therefore, she is pessimistic about the credit risk of company A.
8)The acquisition of a firm can be evaluated with the same tools (Net Present Value) that are used in conventional project valuation. Is this last statement true or false?
9)Assume that you have analyzed a $100 million project using a cost of capital of 15% and come up with an NPV of $1 million. The manager who has to decide on the project argues that this NPV is too small for a project of this size and that this indicates a poor project. Is this last statement true or false?
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