Question :
76.Which of the following statements false?
a.Ideas for investment projects stem : 1325705
76.Which of the following statements is false?
a.Ideas for investment projects stem mainly from the firm’s finance department.
b.Capital projects by their nature are easily reversible.
c.Once a capital project is approved, the role of a financial manager is non-existent.
d.all of the above statements are false.
e.Only (b) and (c) are false
77.Financial managers prefer a capital budgeting technique with which of the following characteristics?
a.Easily-applied and considers cash flows
b.Recognizes the time value of money and accounts for risk and return
c.When applied leads to higher stock prices
d.all of the above
e.(a) and (b) only
78.When evaluating different capital budgeting techniques such as payback, net present value, internal rate of return, profitability index and accounting rate of return,
a.all techniques are equal and there is no reason to prefer one technique over another.
b.some techniques have advantages over others.
c.corporate managers have “stuck with” the same techniques over the last thirty years.
d.both (a) and (b)
e.all of the above
79.Which of the following is not a “con” of the Accounting Rate of Return method?
a.The method makes no adjustment for the time value of money or project risk.
b.The depreciation method used impacts both the numerator and denominator.
c.It focuses on net income rather than a company’s ability to generate cash.
d.The choice of the hurdle rate is arbitrary.
e.All of the above are cons of the Accounting Rate of Return method.
80.Which of the following statements is false?
a.The main virtue of the payback method is its simplicity.
b.Some managers believe the payback method implicitly accounts for the riskiness of longer-term projects.
c.Some managers may prefer the payback method because it leads to accepting projects that payback quickly which may be ideal for them in terms of building their short-term career.
d.The payback method considers all cash flows for a project, even those occurring after the payback period.
e.Both (a) and (d) are false
81.While the NPV approach offers many advantages over some other capital budgeting techniques, several cons exist with respect to the approach. Which of the following is (are) cons of the NPV method?
a.It fails to consider all of a project’s relevant cash flows.
b.It fails to consider the time value of money.
c.It focuses on net income and not cash flow.
d.It seems less intuitive to many users than other methods.
e.all of the above are cons of the NPV method.
82.Which of the following statements is true?
a.The IRR method ignores the time value of money.
b.The hurdle rate used with the IRR method is determined subjectively and therefore is arbitrary.
c.Many managers have difficulty comprehending the rate of return answer determined by the IRR method.
d.Multiple IRRs can result for some projects which can lead to a difficulty for the IRR method.
e.Both (b) and (d) are true
83.Which of the following statements is false?
a.Multiple IRRs result when a project’s cash flows alternate between negative and positive values.
b.If a project has multiple IRRs its NPV profile will cross the x-axis more than once.
c.The general rule of thumb is that a project will have as many IRRs are there are negative cash flows.
d.There are occasions when a project’s IRR may involve imaginary numbers.
e.All of the above statements are true.
