- Question 6 - True and False questions - Indicate True or False (10 marks) Question True False 1. A negative net present value is acceptable. 2. Sunk costs are relevant past expenditures. 3. The liquidity ratio tests the solvency of the company. 4. Cost centres are used for profit control. 5. Return on investment is used to compare divisions. 6. The profitability index is used to compare projects. 7. Cash budgets are year end financial reports. 8. Operating budgets use present values. 9. Capital projects are difficult to reverse once undertaken. 10. Residual value considers expected returns. Present Value of a Lump Sum of $1 Present Value of $1 at Compound Interest 10% 12% 15% Year 6% 20% . 5 6 7 8 0.943 0.890 0.840 0.792 0.747 0.705 0.665 0.627 0.592 0.558 0.909 0.826 0.751 0.683 0.621 0.564 0.513 0.467 0.424 0.386 0.893 0.797 0.712 0.636 0.567 0.507 0.452 0.404 0.361 0.322 0.870 0.756 0.658 0.572 0.497 0.432 0.376 0.327 0.284 0.247 0.833 0.694 0.579 0.482 0.402 0.335 0.279 0.233 0.194 0.162 9 10