Question 1

___________projects do not compete with each other; the acceptance of one the others fromconsideration.

Accepted Answer

A)  Capital; eliminates 
B)  Replacement; does not eliminate 
C)  Mutually exclusive; eliminates 
D)  Independent; does not eliminate

Question 2

All of the following are weaknesses of the payback period EXCEPT

Accepted Answer

A)  a disregard for cash flows after the payback period. 
B)  the difficulty of specifying the appropriate payback period. 
C)  only an implicit consideration of the timing of cash flows. 
D)  it uses cash flows, not accounting profits.

Question 3

The discount rate, required return, cost of capital, or opportunity cost is the minimum return that must be earned on a project to leave the firm's market value unchanged.

Accepted Answer

A) True 
 B)False

Question 4

One weakness of payback is its failure to recognize cash flows that occur after the payback period.

Accepted Answer

A) True 
 B)False

Exam 12: Capital Budgeting: Principles and Techniques

___________projects do not compete with each other; the acceptance of one the others fromconsideration.

All of the following are weaknesses of the payback period EXCEPT

The discount rate, required return, cost of capital, or opportunity cost is the minimum return that must be earned on a project to leave the firm's market value unchanged.

One weakness of payback is its failure to recognize cash flows that occur after the payback period.