QUESTION 25

Which of the following statements is true?

		In order for the constant growth dividend model to properly value a firms common stock, R must be greater than g.
		From a practical perspective, the growth rate in the constant growth dividend model must be greater than the sum of the long-term rate of inflation and the long-term real growth rate of the economy.
		In order for the constant growth dividend model to properly value a firms common stock, g must be greater than R.
		The constant growth dividend model can be used effectively to value the common shares of a mixed growth stock.

4 points

QUESTION 26

Two projects are considered to be independent if

		selecting one would have no bearing on accepting the other.
		their cash flows are unrelated.
		Both a and b
		None of the above

4 points

QUESTION 27

Two projects are considered to be contingent projects if

		selecting one would automatically eliminate accepting the other.
		the acceptance of one project is dependent on the acceptance of the other.
		rejection of one project does not eliminate the selection of the other.
		None of the above

4 points

QUESTION 28

To accept a capital project when using NPV,

		the project NPV should be less than zero.
		the project NPV should be greater than zero.
		Both a and b
		None of the above

4 points

QUESTION 29

Which of the following statements about the payback method is true?

		The payback method is consistent with the goal of shareholder wealth maximization
		The payback method represents the number of years it takes a project to recover its initial investment plus a required rate of return.
		There is no economic rational that links the payback method to shareholder wealth maximization.
		None of the above statements are true.

4 points

QUESTION 30

Which of the following is true about the Net Present Value method?

		The NPV does not utilize time value of money concepts.
		The NPV assumes that all cash flows are reinvested at the firms discount rate.
		The NPV allows projects to be ranked by rate of return.
		The NPV is a rate of return that is acceptable to the firm.

4 points

QUESTION 31

When evaluating capital projects, the decisions using the NPV method and the IRR method will agree if

		the projects are independent.
		the cash flow pattern is conventional.
		the projects are mutually exclusive.
		Both a and b are correct.

4 points

QUESTION 32

Additions to tangible assets, intangible assets ,and current assets can be described as:

		cash flows associated with investments.
		operating cash flows.
		free cash flows.
		None of the above.

4 points

QUESTION 33

The impact of a project on a firm's overall value depends on

		a firm's accounting earnings.
		a firm's cash flow.
		a project's cash flow.
		None of the above.

4 points

QUESTION 34

Which of the following should not be included in a project's cash flow calculations?

		cash expenses
		cash revenues
		allocated expenses
		None of the above.