ACCT Summary Chap 7-8

If IRR exceeds the required rate or return for a project, then the NPV of that project is negative

TRUE

The SRR is the same as the IRR

FALSE

If 2 projects require the same amount of investment, then the preference ranking computed using either the project profitability index or the NPV will be the same

TURE

In preference decisions, the profitability index and IRR method may produce conflicting rankings if projects

TRUE

The project profitability index is used to compare the IRR of 2 companies with different investment amounts

FALSE

Projects with shorter payback periods are always more profitable than projects with longer payback periods

FALSE

A very useful guide for making investment decisions is: The shorter the payback period, the more profitable the project

FALSE

If IRR is used as a discount rate in computing the NPV, the NPV will be

ZERO

A master budget consists on interdependent budgets with the cash budget being the last budget prepared.

FALSE

A budgeted income statement for a company with interest expense will display both NOI and NI as two separate dollar amounts

TRUE

Operating budgets typically cover a 3-month period of time only since it is too difficult to estimate results beyond a quarter.

FALSE

A production budget will include the cost of materials that need to be purchased in order to produce some product to sell.

FALSE

The DL budget will include the total direct and indirect labor hours needed to meet production goals.

FALSE

Some companies might prepare a cash budget on a weekly or even on a daily basis

TRUE

A cash budget will not include the cash paid for treasury stock

FALSE

The discount rate must be specified in advance to which of the following methods?

Only NPV