final jawn

the gold standard of investment criteria refers to the

net present value rule

the ___ model answers one basic question: How soon will I recover my initial investment

payback period

which statement below is false

two projects are mutually exclusive if the acceptance of one project has no bearing on the acceptance or rejection of the other project

the IRR is the discount rate that produces

an NPV equal to 0

which of the statements below is true of the payback period method

it ignores the cash flow after the initial outflow has been recovered

the net present value of an investment is _____

the present value of all benefits (cash inflows) minus the present value of all costs (cash outflows) of the project

the ____ method of capital budgeting is a ratio of the present value of benefits divided to the initial investment cost

profitability index

_____ are an accounting measure of performance during a specific period of time while ___ is the actual inflow or outflow of money

profits: cash flows

which of the statements below is true

an increase in working capital can be brought about by an increase in inventory

which of the following should not be included in the forecasted cash flows of an investment project

interest paid on the debt secured from the proposed investment project

the advantage of ___ over ____ depreciation is that you can write off more of your capital costs in the earlier years

MACRS: straight line

which of the following would not be expected to affect the decisions of whether to undertake an internal investment

cost of a previous feasibility study that was conducted for this project

to get the operating cash flow, given the net operating profit after taxes we add back____

depreciation

_____ of a project are those that have already been incurred and are irrelevant to our current financing decisions

sunk costs

whenever a new product competes against a companies already existing products and reduces the sales of those products, ___ occur

erosion costs

An implicit cost of increasing the proportion of debt in a firms capital structure is that

shareholders will demand a higher rate of return

generally speaking, when the information is available, investors prefer to use ____ rather than ____ when evaluating a firm

market values, book values

Capital structure decisions refer to the

blend of equity and debt used by a firm

In capital budgeting, the ____ is the appropriate discount to use when calculating the NPV of an average risk project

WACC