ue or False. Write true if the statement is correct, or false if the statement is incorrect. oring is right minus wrong. Place final answers in the answer sheet. Erasures and erations are not allowed in the answer sheet. 1. Although a cash outlay for a noncurrent asset such as a machine would be considered a capital budgeting analysis, a cash outlay for working capital items such as inventory, would not be considered. 2. Cost of capital is a broad concept involving a blending of the costs of all sources of capital, both debt and equity. 3. In discounted cash flow analysis, cash flows are assumed to occur uniformly throughout a period. 4. The time adjusted rate of return is that discount rate which will cause a project's net present value to be zero. 5. If the cash flows of a project are uneven, then the project's time-adjusted rate of return cannot be computed. 6. To be acceptable, a project's time-adjusted rate of return cannot be less than the company's cost of capital. 7. The release of working capital at the termination of an investment project would be a taxable cash inflow. 8. The profitability index is computed by dividing an asset's net present value by the investment requirement in a project. 9. Discounted cash flow methods automatically provide for a return of the original investment. 10. In a present value analysis, the higher the discount rate, the higher the present value of a given sum. 11. In ranking investment projects, a project with a high net present value should always be ranked above a project with a lower net present value. 12. A very useful guide for a=-making investment decisions is: Projects with short payback periods are more profitable than projects with long payback periods. 13. The "simple rate of return" method focuses on net income, rather than cash flows. 14. The simple rate of return is equal to "incremental net income"/initial investment. 15. The profitability index is conceptually superior to the time-adjusted rate of return method of making preference decisions because it will always give the correct signal as to relative desirability of alternatives, even if alternatives have different lives and different patterns of earnings