TRUE OR FALSE Expansion Projects are projects that are purchased or built to increase existing operations Project A has a pattern of high cash inflows in the early years, while Project B has a majority of its cash inflows in the later years At the current required rate of return, Projects A and B have identical NPVs Assuming that interest rates are increasing, other things held constant, this change will cause B to become more preferable than A A capital budgeting project is acceptable if the rate of return required for a project is greater than the projects internal rate of return The NPV and the IRR criterion will always yield to the same decision if the projects cash flows are unconventional While the NPV profile curve is always downward sloping for conventional projects Mutually exclusive project can be both rejected by the company The payback period is a measure of a project liquidity and used mostly by smaller companies that do have limited sources of capital to invest The IRR can be identified on the NPV Profile as the point where the NPV Profile Line intersects with the Y Axis The discounted payback period is a technique aligned with the goal of the firm which is shareholder wealth maximization Marginal Cost of Capital, in theory, is increasing as the firm acquires additional capital The point at which two projects NPV crosses in an NPV Profile is called crossover point Any capital budgeting decision should depend solely on a projects forecasted cash flows and the firms opportunity rate of return Such a decision should not be affected by managers tastes, the choice of accounting method, or the profitability of other independent projects Independent Projects can be both accepted by the company even if the NPVs of the project are negative The NPV and the IRR criterion assumes that the cash flows of the project are reinvested in the cost of capital If the IRR and NPV have conflicting results, the decision that would lead to a higher NPV should be followed Effective capital budgeting can improve the timing of asset acquisition and the quality of assets purchased, thereby providing an opportunity to purchase and install assets before they are needed

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TRUE OR FALSE: Expansion Projects are projects that are purchased or built to increase existing operations Project A has a pattern of high cash inflows

TRUE OR FALSE:

Expansion Projects are projects that are purchased or built to increase existing operations
Project A has a pattern of high cash inflows in the early years, while Project B has a majority of its cash inflows in the later years. At the current required rate of return, Projects A and B have identical NPVs. Assuming that interest rates are increasing, other things held constant, this change will cause B to become more preferable than A
A capital budgeting project is acceptable if the rate of return required for a project is greater than the projects internal rate of return
The NPV and the IRR criterion will always yield to the same decision if the projects cash flows are unconventional
While the NPV profile curve is always downward sloping for conventional projects
Mutually exclusive project can be both rejected by the company
The payback period is a measure of a project liquidity and used mostly by smaller companies that do have limited sources of capital to invest
The IRR can be identified on the NPV Profile as the point where the NPV Profile Line intersects with the Y-Axis
The discounted payback period is a technique aligned with the goal of the firm which is shareholder wealth maximization
Marginal Cost of Capital, in theory, is increasing as the firm acquires additional capital
The point at which two projects NPV crosses in an NPV Profile is called crossover point
Any capital budgeting decision should depend solely on a projects forecasted cash flows and the firms opportunity rate of return. Such a decision should not be affected by managers tastes, the choice of accounting method, or the profitability of other independent projects
Independent Projects can be both accepted by the company even if the NPVs of the project are negative
The NPV and the IRR criterion assumes that the cash flows of the project are reinvested in the cost of capital
If the IRR and NPV have conflicting results, the decision that would lead to a higher NPV should be followed
Effective capital budgeting can improve the timing of asset acquisition and the quality of assets purchased, thereby providing an opportunity to purchase and install assets before they are needed