Finance Final
SCF formula
Change in revenues - expenses change + depreciation
Modified IRR
Discount rate that forces the present value of the projects terminal value equal to present value of costs
A capital budgeting project is acceptable if the required rate of return is higher than the IRR
False
The NPV is negative when discount rate is
Greater than IRR
Which of the following statements about IRR capital budgeting technique are correct?
IRR is the Discount rate where expected cash flows are equal to initial amount invested
Which of the following should be included in an expansion projects terminal cash flow
Purchase price
Which of the following statements concerning cash flow is correct
Sunk costs SHOULD be included
Which of the following statements concerning replacement analysis is correct?
The net cash flow from the sale of old machine should be included as part of the new machine's initial investment outlay.
If required rate of return increases NPV decreases
True
When evaluating multiple independent projects, a firm will reach the same conclusions about accepting a project using NPV or IRR
True
which of the following is true of the net present value capital budgeting technique?
c. If NPV is positive, project is acceptable
the post audit is a simple process in which actual results of capital budgeting making decision are compared with forecasted results and only discrepancies that arise from management are evaluated further
false