uestion (2) For each statement state which one is true and which one is False? 17 Marks] 1 2 3 4 5 6 7 8 9 Question If someone offers you the choice of receiving $1000 today versus receiving $1000 a year from today, you should take the money today if your time value of money is greater than zero. A strength of the weighted factor comparison technique is its scientific foundation and its elimination of subjectivity from decision making If your time value of money is 10% annually, then you will be indifferent between receiving $1000 today and receiving $1100 one year from today Based on the principles of engineering economic analysis, you should bet on the horse with the lowest odds to win, because risk and returns tend to be positively correlated. Every economic decision should be based on the time value of money. When dealing with multiple alternatives having unequal lives, the planning horizon equals the least common multiple of lives. The MARR should be at least as great as the firm's weighted cost of capital and should reflect the opportunity cost for money. Among the various sources of capital, U.S. large cap equities have a lower cost of capital than do U.S. small cap equities. True False The most common method of valuing the cost of equity capital is to divide the annual dividend by the average market value of a share of stock. 10 The cost of debt capital needs to reflect the tax deductibility of costs of debt. 11 The Eastman hurdle rate calculator can be used for any company and under any conditions that are specifically targeted by the calculator. 12 True or False: A company's beta can be used to accurately forecast its stock price during the coming year. 13 True or False: Historical beta values are not impacted by rare events that might adversely affect a firm's stock price. 14 True or False: The Federal Reserve Bank's prime lending rate should be used for the risk-free rate in the capital asset pricing model, 15 When using the Eastman hurdle rate calculator, if venture capital is being sought, the hurdle rate obtained will not be affected by ownership, plant site, or technology profiles. 16 Present worth analysis is the most popular DCF measure of economic worth. 17 Unless non-monetary considerations dictate otherwise, choose the mutually exclusive investment alternative that has the greatest present worth, regardless of the lives of the alternatives. 18 When using present worth analysis to evaluate the economic viability of mutually exclusive alternatives, use a common period of time in the comparison. 19 The "do nothing" alternative always has negligible incremental costs and revenues. 20 Either ranking or incremental analysis can be used with all four "worth" methods (PW, FW, AW, and CW)