True or False questions:

1. Working capital requirements incurred only in the initial year of a capital budgeting projects is always a cash outflow in the capital budgeting forecast.

2. In perfect capital markets, both the capital structure of the firm and method of cash flow payout by the firm is irrelevant.

3. Both the IRR and NPV methods included the time value of money whereas the payback and discounted payback methods do not.

4. When a company uses share repurchases to distribute cash flows, an investor can create a homemade dividend by selling their shares, while matching the ex-dividend price if cash dividends were issued instead.

5. The trade-off theory factors in the present values of the interest tax shield, financial distress costs and agency costs, with the value of the levered firm expected to exceed the value of the unlevered firm if the firms shareholder value is maximized.