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TRUE/FALSE 1)Capital budgeting uses financial criteria exclusively when evaluating projects

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TRUE/FALSE

1)Capital budgeting uses financial criteria exclusively when evaluating projects.

2. Capital budgeting uses both financial and non-financial criteria when evaluating projects.
3. Most capital budgeting techniques focus on cash flows.

6. The decision concerning which assets to acquire to achieve an organization’s objectives is an investing decision.
7. The payback period ignores the time value of money.
8. An organization’s discount rate should be less than the organization’s cost of capital.
9. An organization’s discount rate should be equal to or exceed the organization’s cost of capital.
10. If the net present value is positive, the actual return on a project exceeds the required rate of return.
11. The net present value method provides the actual rate of return for a project.
12. The profitability index gauges the efficiency of a firm’s use of capital.
13. If a project’s internal rate of return is greater than or equal to an organization’s hurdle rate, the project is considered to be an acceptable investment.
14. If a project’s internal rate of return is greater than or equal to an organization’s hurdle rate, the project is considered to be an unacceptable investment.
15. The internal rate of return is the rate at which a project’s net present value is zero.
16. An organization’s hurdle rate should be at least equal to the organization’s cost of capital.
17. Depreciation expense provides a tax shield against the payment of taxes.
18. The tax benefit from depreciation expense is the depreciation amount multiplied by the tax rate.
19. The tax benefit from depreciation expense is the depreciation amount divided by the tax rate.
20. Using MACRS depreciation for tax purposes and straight-line depreciation for book purposes will affect after-tax cash flows during the life of a project.
21. A decision in which projects are ranked according to their impact on achieving company objectives is a screening decision.
22. A decision in which projects are ranked according to their impact on achieving company objectives is a preference decision.
23. In a mutually inclusive project situation, if one project is chosen, all related projects are also chosen.
24. In a mutually inclusive project situation, if one project is chosen, all related projects are eliminated from further consideration.
25. Managers must often use multiple measures to effectively rank capital projects.
26. Reinvestment assumptions are different under each method of ranking capital projects.
27. When considering risk, a manager will often use a judgmental method of risk adjustment.
28. When using the risk-adjusted discount rate method, a manager increases the rate used for discounting future cash inflows.
29. When using the risk-adjusted discount rate method, a manager increases the rate used for discounting future cash outflows.
30. Postinvestment audits can provide feedback of the accuracy of original cash flow estimates.
31. Present value and future value computations assume the use of compound interest.
32. For an ordinary annuity, the first cash flow occurs at the end of the period.
33. For an annuity due, the first cash flow occurs at the end of the period.
34. The accounting rate of return considers the salvage value of an asset.
35. The accounting rate of return considers the time value of money.
36. Accounting rate of return is based on cash flows.