FINAN EXAM

The constant growth formula calculates the stock price: a.) as of the date the first dividend payment (Dt +1) is received (year t + 1). b.) one year after (year t+2) the first dividend payment (Dt +1) is received. c.) one year prior (year t) to the first dividend payment (Dt +1).

c.) one year prior (year t) to the first dividend payment (Dt +1).

For a project with conventional cash flows, the NPV is ______ if the required return is less than the IRR, and it is ______ if the required return is greater than the IRR. a.) negative, negative. b.) positive, negative. c.) positive, positive. d.) negative, positive.

b.) positive, negative.

With cost-cutting proposals, when costs decrease, operating cash flows _____ (decrease/increase.)

increase

If the growth rate (g) is zero, the capital gains yield is ____. a.) cyclical. b.) zero. c.) 100 percent. d.) higher than the dividend yield.

b.) zero.

Which of the following correctly describes the relationship between depreciation, income, taxes, and investment cash flows? a.) As depreciation expense increases, income, taxes, and cash flows will all increase. b.) As depreciation expense increases, net income and taxes will decrease, while cash flows will increase. c.) As depreciation expense increases, income, taxes, and cash flows will all decrease. d.) Depreciation expense has no effect on income, taxes, or cash flows.

b.) As depreciation expense increases, net income and taxes will decrease, while cash flows will increase.

All else constant, the dividend yield will increase if the stock price ____. a.) Increases. b.) Decreases.

b.) Decreases.

Which of the following occurs in the primary market? a.) Outstanding shares are resold. b.) Newly-issued stocks are initially sold. c.) Issuers repurchase shares. d.) Shareholders gift shares to charities.

b.) Newly-issued stocks are initially sold.

The internal rate of return is a function of ____. a.) the cost of debt incurred by a project. b.) a project's cash flows. c.) a project's opportunity costs. d.) the market interest rate.

b.) a project's cash flows.

One common reason for having two classes of common stock with different voting rights is _____. a.) there are no companies that have more than one class of common stock. Only preferred stockholders have differential voting rights. b.) it is easier for insiders such as founding families to maintain control of the company c.) it is easier for outside shareholders to maintain control of the company. d.) it is more convenient for outside shareholders if they don't need to vote.

b.) it is easier for insiders such as founding families to maintain control of the company

Among the three main sources of cash flow, which source of cash flow is the most important and also the most difficult to forecast? a.) The sunk costs incurred before the inception of the project. b.) The costs incurred at the inception of the project. c.) The operating cash flows from net sales over the life of the project. d.) The salvage value of the project.

c.) The operating cash flows from net sales over the life of the project.

Cash flows should always be considered on a(n) ___________ basis. a.) zero-tax b.) before-tax c.) aftertax

c.) aftertax

Opportunity costs are ____. a.) the costs incurred by a firm to preserve its market share. b.) benefits gained as a result of accepting a particular project. c.) benefits lost due to taking on a particular project. d.) the costs of pursuing a specific project.

c.) benefits lost due to taking on a particular project.

The ______ can be interpreted as the capital gains yield. a.) dividend yield. b.) inflation rate. c.) constant growth rate. d.) yield to maturity.

c.) constant growth rate.

A zero-growth model for stock valuation is distinguished by a ____. a.) negative dividend growth rate. b.) zero stock price at Year 0. c.) constant discount rate. d.) constant dividend amount.

d.) constant dividend amount.

Net ______ value is a measure of how much value is created or added today by undertaking an investment.

present

Which of the following entities declares a dividend? a.) Existing shareholders. b.) The management of the company. c.) The board of directors. d.) The CFO.

c.) The board of directors.

An NYSE member who executes customer buy and sell orders is called a ___ broker.

floor

A share of common stock can be valued by determining the _____ value of its future cash flows.

Present

In capital budgeting, the net ______ determines the value of a project to the company. a.) future value. b.) sales. c.) present value. d.) income.

c.) present value.

The ____ rate is the rate at which the NPVs of two projects are equal.

crossover

An independent project _______ (does/doesn't) rely on the acceptance or rejection of another project.

doesn't

A situation in which taking one investment prevents the taking of another is called a mutually _______ investment decision.

exclusive

The ______ step is to determine whether cash flows are relevant.

first

With nonconventional cash flows, there is a possibility that more than one discount rate will make the NPV of an investment zero. This is called the ______ rates of return problem.

multiple

The IRR rule can lead to bad decisions when cash flows are _____ or projects are mutually exclusive. a.) certain. b.) not conventional. c.) conventional.

b.) not conventional.

To prepare _____ financial statements, we need estimates of quantities such as unit sales, the selling price per unit, the variable cost per unit, and total fixed costs. a.) certified. b.) pro forma. c.) GAAP.

b.) pro forma.

When a firm finances new investments, it may set up accounts payable with suppliers, but the balance that the firm must supply is called the investment in net ____ capital.

working

Incremental cash flows come about as a(n) ________ consequence of taking a project under consideration. a.) direct b.) indirect c.) sporadic

a.) direct

One requirement of the dividend growth model is _____. a.) g < R. b.) g > R. c.) g = R. d.) g + R = 1.

a.) g < R.

Using the dividend growth model requires that the growth rate be _____ the discount rate. a.) twice. b.) equal to. c.) greater than. d.) smaller than.

d.) smaller than.

A person who brings buyers and sellers together is called a(n) ______. a.) dealer. b.) lawyer. c.) broker. d.) investor.

c.) broker.

The formula for valuing a constant growth stock is _____. a.) R = P − D1 square root of g. b.) P = D1 − g/R. c.) P = D1 square root of (R − g)2. d.) P0 = D1 square root of (R − g).

d.) P0 = D1 square root of (R − g).

A stock with dividend priority over common stock is called a ____ stock. a.) stated. b.) cumulative. c.) common. d.) preferred.

d.) preferred.

What is net working capital? a.) Total assets minus total liabilities. b.) Current assets minus current liabilities. c.) Current liabilities minus current assets. d.) Current assets plus current liabilities.

b.) Current assets minus current liabilities.

For investors in the stock market, dividends from stocks are fixed and guaranteed, while capital gains are variable and not guaranteed. a.) True. b.) False.

b.) False.

Which of the following are expected cash flows to investors in stocks? - Interest - Fees - Capital gains - Dividends

- Capital gains - Dividends

______ cash flows come about as a direct consequence of taking a project under consideration.

Incremental

Initial public offerings of stock occur in the ____ market. a.) Secondary. b.) Futures. c.) Commodities. d.) Primary.

d.) Primary.

The value of a firm is the function of its _____ rate and its discount rate.

growth.

The ______ -alone principle is the assumption that evaluation of a project may be based on the project's incremental cash flows.

stand

When voting for the board of directors, the number of votes a shareholder is entitled to is usually _____ vote per share held.

one

The point at which the NPV profile crosses the horizontal axis is the: a.) internal rate of return. b.) sum of the cash flows of the project. c.) cost of the project in the first year. d.) required rate of return.

a.) internal rate of return.

Accounts receivable and accounts payable are not an issue with project cash flow estimation unless changes in ______________ are overlooked. a.) net working capital. b.) investor sentiment. c.) tax rates. d.) the cost of capita.

a.) net working capital.

What is the formula to determine the total return for a stock that currently sells for $100, pays a dividend in one year of $2, and has a constant growth rate of 8 percent? a.) R = ($2/$100) + .10 b.) R = ($2/$100) + .08 c.) R = ($8/$100) + .02 d.) R = ($100/$2) + .08

b.) R = ($2/$100) + .08

The discounted payback period has which of these weaknesses? - Exclusion of some cash flows. - Loss of simplicity as compared to the payback method. - Lack of a decision rule. - Arbitrary cutoff date.

- Exclusion of some cash flows. - Loss of simplicity as compared to the payback method. - Arbitrary cutoff date.

NASDAQ has which of these features? - Multiple market maker system. - Single DMM system. - Physical trading floor. - Computer network of securities dealers.

- Multiple market maker system. - Computer network of securities dealers.

An increase in depreciation expense will ____ cash flows from operations. a.) Increase. b.) Not affect. c.) Decrease.

a.) Increase.

True or false: Cash flows should always be considered on an aftertax basis. a.) True b.) False

a.) True

The profitability index is calculated by dividing the PV of the _________ cash flows by the initial investment. a.) future. b.) previous. c.) positive.

a.) future.

An NYSE member who acts as a dealer in particular stocks is called a ______ market maker.

designated

An _____ (decrease/increase) in the size of the first cash inflow will decrease the payback period, all else held constant.

increase.

The idea for _____ -stage growth is that the dividend will grow at a rate of g1 for t years and then grow at a rate of g2 thereafter, forever.

two

Preferred stock has preference over common stock in the _____. - portfolios of individual investors. - number of votes given. - payment of dividends. - distribution of corporate assets.

- payment of dividends. - distribution of corporate assets.

As depreciation expense _____ (decreases/increases), net income and taxes will decrease, while cash flows will ______ (decrease/increase).

increases, increase

When evaluating cost-cutting proposals, how are operating cash flows affected? - Wages are always reduced in cost-cutting endeavors. - The decrease in costs increases operating income. - The decrease in costs decreases operating income. - There is an additional depreciation deduction.

- The decrease in costs increases operating income. - There is an additional depreciation deduction.

Three special case patterns of dividend growth include. - nonconstant growth. - zero growth. - constant growth. - fast growth. - discounted growth. - negative growth.

- nonconstant growth. - zero growth. - constant growth.

The present value of all cash flows (after the initial investment) is divided by the ______ to calculate the profitability index. a.) internal rate of return. b.) discount rate. c.) initial investment. d.) net present value.

c.) initial investment.

When developing cash flows for capital budgeting, it is _____ to overlook important items. a.) rare b.) impossible c.) difficult d.) easy

d.) easy

An asset's value is determined by the present value of its ______ cash flows. a.) previous. b.) foregone. c.) competitor's. d.) future.

d.) future.

The difference between a firm's current assets and its current liabilities is known as the _____. a.) capital structure. b.) net opportunity capital. c.) long-term capital. d.) net working capital.

d.) net working capital.

Which capital budgeting decision method finds the present value of each cash flow before calculating a payback period? a.) Modified internal rate of return b.) Payback period c.) Average accounting return d.) Discounted payback period

d.) Discounted payback period

The dividend growth model determines the current price of a stock as its dividend next period _____ (multiplied/dividend) by the discount rate _____ (less/plus) the dividend growth rate.

divided, less

The NYSE member who acts as a dealer in a small number of securities is called a(n) _____. a.) member. b.) specialist. c.) floor broker. d.) floor trader.

b.) specialist.

The payback period rule ______ a project if it has a payback period that is less than or equal to a particular cutoff date. a.) suggests rejecting. b.) suggests accepting.

b.) suggests accepting.

Which of the following statements regarding the relationship between book value, sales price, and taxes are true when a firm sells a fixed asset? - Book value represents the purchase price minus the accumulated depreciation. - There will be a tax savings if the book value exceeds the sales price. - Taxes are based on the difference between the purchase price and sales price of the asset. - Taxes are based on the difference between the book value and the sales price.

- Book value represents the purchase price minus the accumulated depreciation. - There will be a tax savings if the book value exceeds the sales price. - Taxes are based on the difference between the book value and the sales price.

In the dividend discount model, the expected return for investors comes from which two sources? - Tax rate. - Dividend yield. - Amount last dividend paid. - Growth rate.

- Dividend Yield. - Growth rate.

Once cash flows have been estimated, which of the following investment criteria can be applied to them? - NPV. - the constant growth dividend discount model. - YTM. - IRR. - payback period.

- NPV. - IRR. - payback period.

If a project has multiple internal rates of return, which of the following methods should be used? - IRR. - NPV. - MIRR.

- NPV. - MIRR.

Identify the three main sources of cash flows over the life of a typical project. - Net cash flows from salvage value at the end of the project. - Cash outflows from investment in plant and equipment at the inception of the project. - Test marketing expenses that have been classified as sunk costs. - Net cash flows from sales and expenses over the life of the project.

- Net cash flows from salvage value at the end of the project. - Cash outflows from investment in plant and equipment at the inception of the project. - Net cash flows from sales and expenses over the life of the project.

What are the advantages of the payback period method for management? - The payback period method is easy to use. - The payback period adjusts for the discount rate. - The payback period method is ideal for short projects. - It allows lower level managers to make small decisions effectively.

- The payback period method is easy to use. - The payback period method is ideal for short projects. - It allows lower level managers to make small decisions effectively.

True or false: Some projects, such as mines, have cash outflows followed by cash inflows, which are then followed by cash outflows, giving the project multiple rates of return. a.) True. b.) False.

a.) True.

True or false: The crossover rate is the rate at which the NPVs of two projects are equal. a.) True. b.) False.

a.) True.

A project should be __________ if its NPV is greater than zero. a.) accepted. b.) rejected. c.) delayed.

a.) accepted.

If the tax rate increases, the value of the depreciation tax shield will ______. a.) increase. b.) decrease. c.) not be affected.

a.) increase.

According to the basic IRR rule, we should _____. a.) reject a project if the IRR is less than the required return b.) accept the project if the IRR is less than the required return c.) reject a project if the IRR is greater than the required return d.) reject a project if the IRR is less than 10%

a.) reject a project if the IRR is less than the required return

A(n) ______ project does not rely on the acceptance or rejection of another project. a.) Independent. b.) Mutually exclusive. c.) Co-dependent. d.) Dependent.

a.) Independent.

The two most important stock markets in the United States are the New York Stock Exchange and ______. a.) NASDAQ. b.) the TSX Venture Exchange. c.) the Tokyo Stock Exchange. d.) the London Stock Exchange.

a.) NASDAQ.

True or false: When developing cash flows for capital budgeting, it is easy to overlook important items. a.) True b.) False

a.) True

True or false: IRR approach may lead to incorrect decisions in comparison of two mutually exclusive projects. a.) True. b.) False.

a.) True.

Sunk costs are costs that ____. a.) relate to other projects of the firm. b.) cannot be measured. c.) will not contribute to profits in the long run even if a project is accepted. d.) have already occurred and are not affected by accepting or rejecting a project.

d.) have already occurred and are not affected by accepting or rejecting a project.

Sunk costs are costs that ____. a.) will not contribute to profits in the long run even if a project is accepted. b.) cannot be measured. c.) relate to other projects of the firm. d.) have already occurred and are not affected by accepting or rejecting a project.

d.) have already occurred and are not affected by accepting or rejecting a project.

A ____ is a payment by a corporation to shareholders, made in either cash or stock.

dividend

True or false: With more than one class of common stock, it is easier for insiders such as founding families to maintain control of the company. a.) true. b.) false.

a.) true.

Capital Corp is considering a project whose internal rate of return is 14%. If Capital's required return is 14%, the project's NPV is: a.) zero. b.) positive. c.) negative.

a.) zero.

When applying two-stage growth, in the second stage, g2 _____. a.) cannot be less than R. b.) must be twice as large as R. c.) must be equal to R. d.) must be less than R.

d.) must be less than R.

Internal rate of return (IRR) must be compared to the ________ in order to determine the acceptability of a project. a.) required return. b.) inflation rate. c.) federal funds rate.

a.) required return.

True or false: The MIRR function eliminates multiple IRRs and should replace NPV. a.) True. b.) False

b.) False.

When an asset is sold, there will be a tax savings if the _____ value exceeds the sales price.

book

An increase in depreciation expense will ____ cash flows from operations. a.) decrease. b.) not affect. c.) increase.

c.) increase.

Which of the following is an example of a sunk cost? a.) cost of new equipment b.) bonus to top management c.) test marketing expenses d.) salvage value of equipment

c.) test marketing expenses

When a company is new and does not pay dividends and is not yet profitable, then you may use a benchmark price- _____ ratio to estimate the stock price.

sales

The three attributes of NPV are that it: - doesn't rely on a discount rate. - uses cash flows. - uses all the cash flows of a project. - discounts the cash flows properly.

- uses cash flows. - uses all the cash flows of a project. - discounts the cash flows properly.

NPV ______ cash flows properly. a.) discounts. b.) compounds.

a.) discounts.

How does the timing and the size of cash flows affect the payback method? Assume the project does pay back within the project's lifetime. a.) Receiving every cash inflow sooner will increase the payback period, all else held constant. b.) The timing but not the size of the cash flows affects the payback period. c.) An increase in the size of the first cash inflow will decrease the payback period, all else held constant. d.) A delay in receiving the cash inflows will decrease the payback period.

c.) An increase in the size of the first cash inflow will decrease the payback period, all else held constant.

When assuming nonconstant growth in dividends, to avoid the problem of having to forecast and discount an infinite number of dividends, we must require that the dividends _____. a.) grow at the exact growth rate of sales forever. b.) always revert to zero after the third year. c.) grow at different rates every year forever. d.) start growing at a constant rate sometime in the future.

d.) start growing at a constant rate sometime in the future.

_____ budgeting is the decision-making process for accepting and rejecting projects.

capital

Investment firms that are active participants in stocks assigned to them are called ____ liquidity providers.

supplemental

The value of a firm is the function of its ______ rate and its _______ rate. a.) growth; discount. b.) discount; burn. c.) growth; inflation.

a.) growth; discount.

When voting for the board of directors, the number of votes a shareholder is entitled to is generally determined as follows: a.) one vote per shareholder. b.) one vote per proxy. c.) one vote per share held. d.) one vote for every 100 shares held.

c.) one vote per share held.

The amount of time needed for the cash flows from an investment to pay for its initial cost is the _____ period. a.) internal return. b.) discounted payback. c.) payback. d.) net present value.

c.) payback.

A calculated NPV of $15,000 means that the project is expected to create a positive value for the firm and _____. a.) the firm should only accepted if the project has a high payback period. b.) it will never cost the firm more than calculated in the cash flow analysis. c.) should be accepted if there is no capital rationing constraint.

c.) should be accepted if there is no capital rationing constraint.

According to the _________ principle, once the incremental cash flows from a project have been identified, the project can be viewed as a "minifirm." a.) walk-alone b.) stand-and-deliver c.) stand-alone d.) stand-with

c.) stand-alone

The goal of many successful organizations is a(n) ______ rate of growth in dividends. a.) negative. b.) zero. c.) steady. d.) erratic.

c.) steady.

The NYSE differs from the Nasdaq primarily because the NYSE has _____. - an auction market. - brokers. - specialists. - a physical location. - a faster network.

- an auction market. - specialists. - a physical location.

Arrange the steps involved in the discounted payback period in order starting with the first step. - Add the discounted cash flows. - Discount the cash flows using the discount rate. - Accept if the discounted payback period is less than some prespecified number of years.

1.) Discount the cash flows using the discount rate. 2.) Add the discounted cash flows. 3.) Accept if the discounted payback period is less than some prespecified number of years.

Interest expenses incurred on debt financing are ______ when computing cash flows from a project. a.) ignored. b.) treated as cash outflows. c.) spread over the life of the project. d.) treated as cash inflows.

a.) ignored.

The point at which the NPV profile crosses the vertical axis is the: a.) internal rate of return. b.) cost of the project in the first year. c.) required rate of return. d.) sum of the cash flows of the project.

d.) sum of the cash flows of the project.

The main reason for considering nonconstant growth in dividends is to allow for _____ growth rates over _____. a.) supernormal; some infinite length of time. b.) normal; some finite length of time. c.) finite; some infinite length of time. d.) supernormal; some finite length of time.

d.) supernormal; some finite length of time.

The dividend yield is determined by dividing the expected dividend (D1) by _____. a.) the growth (g). b.) the discount rate (R). c.) retained earnings. d.) the current price (P0).

d.) the current price (P0).

When analyzing a proposed investment, we _______ (will/won't) include interest paid or any other financing costs.

won't

The IRR rule can lead to bad decisions when _____ or _____. - cash flows are not conventional. - NPV is positive. - payback period is less than two years. - projects are mutually exclusive.

- cash flows are not conventional. - projects are mutually exclusive.

Opportunity costs are classified as ______ costs in project analysis. a.) relevant b.) irrelevant c.) intangible d.) sunk

a.) relevant

Accounts receivable and accounts payable are not an issue with project cash flow estimation unless changes in ______________ are overlooked. a.) investor sentiment. b.) tax rates. c.) the cost of capital. d.) net working capital.

d.) net working capital.

Common stock has no special preference either in receiving ____ or in bankruptcy.

dividends

Which of the following are features of common stock? - It has no special preference in bankruptcy. - It receives interest semi-annually. - It generally has voting rights. - It has no special preference in receiving dividends. - It receives dividends every quarter.

- It generally has voting rights - It has no special preference in bankruptcy -It has no special preference in receiving dividends

Which of the following are weaknesses of the payback method? - The cutoff date is arbitrary. - Time value of money principles are ignored. - All cash flows are included in the payback period. - Cash flows received after the payback period are ignored.

- The cutoff date is arbitrary. - Time value of money principles are ignored. - Cash flows received after the payback period are ignored.

Capital ______ is the decision-making process for accepting and rejecting projects. a.) structure. b.) spending. c.) relevance. d.) budgeting.

d.) budgeting.

Someone who maintains an inventory of stocks and buys and sells those stocks is known as a ____. a.) retailer. b.) broker. c.) speculator. d.) dealer.

d.) dealer.

Which of the following are mutually exclusive investments? - Two computer systems - one for the administrative office and one for the security cameras. - Two different choices for the assembly lines that will make the same product. - A restaurant or a gas station on opposite corners. - A restaurant or a gas station on the same piece of land.

- Two different choices for the assembly lines that will make the same product. - A restaurant or a gas station on the same piece of land.

Which one of the following is the equation for estimating operating cash flows using the tax shield approach? a.) OCF = (Sales - Costs) × (1 - Tax rate) + Depreciation × Tax rate. b.) OCF = (Sales - Costs) × (1 - Tax rate) + Depreciation. c.) OCF = (Sales - Costs) × Tax rate + Depreciation × (1 - Tax rate). d.) OCF = (Sales - Costs) + Deprecation × Tax rate.

a.) OCF = (Sales - Costs) × (1 - Tax rate) + Depreciation × Tax rate.

A pro _____ financial statement projects future years' operations.

forma

Investment in net working capital arises when ___. - equipment is purchased using long term debt. - cash is kept for unexpected expenditures. - inventory is purchased. - credit sales are made.

- cash is kept for unexpected expenditures. - inventory is purchased. - credit sales are made

Which of the following are fixed costs? - cost of equipment. - net working capital. - rent on a production facilitiy. - inventory costs.

- cost of equipment. - rent on a production facilitiy.

Operating cash flow is a function of _____. - salvage value of equipment. - initial investment in equipment. - earnings before interest and taxes. - taxes. - depreciation.

- earnings before interest and taxes. - taxes. - depreciation.

The basic NPV investment rule is: - accept a project if the discount rate is above zero. - reject a project if its NPV is less than zero. - accept a project if the NPV is less than zero. - accept a project if the NPV is greater than zero. - if the NPV is equal to zero, acceptance or rejection of the project is a matter of indifference

- reject a project if its NPV is less than zero. - accept a project if the NPV is greater than zero. - if the NPV is equal to zero, acceptance or rejection of the project is a matter of indifference

While making capital budgeting decisions, which of the following sentence is true regarding the initial investment of net working capital? a.) It is treated as sunk cost which will not recovered. b.) It is not at all considered while making capital budgeting decisions. c.) It is expected to be recovered by the end of the project's life. d.) It is treated as cash outflow at the end of the project's life.

c.) It is expected to be recovered by the end of the project's life.

Which approach to estimating the operating cash flows uses the following equation? OCF = (Sales − Costs) × (1 − Tax rate) + Depreciation × Tax rate a.) Top-down approach. b.) Bottom-up approach. c.) Tax shield approach.

c.) Tax shield approach.

The assumption of constant growth infers that _________. a.) the real interest rate remains constant. b.) stock prices remain constant. c.) dividends change at a constant rate.

c.) dividends change at a constant rate.

Which of the following represents the valuation of stock using a zero-growth model? a.) dividends x discount rate. b.) discount rate/dividends. c.) dividends/discount rate. d.) (dividends)^discount rate.

c.) dividends/discount rate.

One of the main disadvantages of the discounted payback period rule is that the cutoff is arbitrarily set and cash flows beyond that point are: a.) magnified. b.) considered significant. c.) ignored. d.) included.

c.) ignored.

Which is the formula used to estimate a stock price based on the benchmark PE? a.) Pt = Benchmark PE ratio − EPSt b.) Pt = Benchmark PE ratio × EPSt c.) Pt = Benchmark PE ratio/EPSt

b.) Pt = Benchmark PE ratio × EPSt

The first step in estimating cash flow is to determine the _________ cash flows. a.) operating b.) relevant c.) spacious

b.) relevant

If the IRR is greater than the _______ ________, we should accept the project. a.) inflation rate. b.) required return. c.) payback period. d.) tax rate.

b.) required return.

Which one of the following is true about dividend growth patterns? a.) Dividends always grow at a differential rate. b.) Dividends always grow at a constant rate. c.) Dividends may grow at a constant rate. d.) Dividends never grow.

c.) Dividends may grow at a constant rate.

The IRR is the discount rate that makes the NPV of a project equal to ______. a.) the terminal book value of the project's fixed assets. b.) the payback period. c.) zero. d.) the project's initial cost.

c.) zero.

The tax saving that results from the depreciation deduction is called the depreciation tax ______.

shield.