Finance Final

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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


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