1)Select one advantage of IRR as a capital budget method

1)Select one advantage of IRR as a capital budget method.

• a.)It is useful for comparing projects with different lifespans.
• b.)It tells a company how long it will take to recover their investment.
• c.)It generates more accurate cash flow estimates.
• d.)It is relatively simple and easily comprehensible.

2)What is one disadvantage of NPV as a capital budget method?

• a.)It can be inaccurate because a company cannot adjust the discount rate when calculating NPV.
• b.)There is disagreement about whether a project with a negative NPV should be approved or not.
• c.)It is not very good at accounting for opportunity cost.
• d.)It can only be used to assess a single investment and is not a comparative tool
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3)Although __________ is recorded as an expense on the cash flow statement, it is not included as part of cash flow in the capital budgeting process.

• a.)tax
• b.)depreciation
• c.)an equipment purchase
• d.)a sunk cost

4)Which of the following is an example of an operational risk for a company that manufactures automobiles?

• a.)An economic recession that causes people to stop buying new cars
• b.)Consumers who purchase cars directly from the manufacturer missing loan payments
• c.)Falling profit margins due to stiff competition among automobile manufacturers
• d.)Disruption to the supply chain of material, due to domestic unrest in the source country