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1 considered when evaluating decision rules? Which of the following element/s should be capital budgeting Time value of money A. . Adjustment for risk Creating value for the firm All of the above C. D. Which of the following statement is NOT true about Net Present Value decision rule? A. If the NPV is negative, reject the project B. the wealth of the owners C. 2. A positive NPV means the project will increase If there is a conflict result between NPV and IRR, always follow IRR D NPV rule take into consideration of the time value of money 3. The initial cost back. measures the time to get the A. B. C. D. Internal Rate of Return Net Present Value Payback period Profitability Index What is/are the advantage/s of Payback 4. method? A. Easy to understand No adjustment for uncertainty of later cash B. flows Ignores the time value of money Biased again short-term project C. D. The main difference between Payback and Discounted Payback is: A. 5. Discounted Payback accounts for the time value of money and Payback . the cash flows and Payback C. about the increase in value D. does not Discounted Payback accounts for the risk of does not Only Payback does not provide an indication Both A and B Which of the following is NOT correct about Average Accounting Return? A. 6. Accept the project if the ARR is large than IRR Accept the project if the ARR is greater than a . preset rate C. ARR must be equal to a preset rate for the acceptance of a project D. Both A and C 7. Net Present Value. A. B. C. is the most important alternative to IRR Payback Method Average Accounting Return Discounted Payback D. 8. The stand-alone principle allows us to analyze each project in isolation from the firm simply by focusing on cash flows. A. Future . Constant C. Incremental None of the above D. 9. are costs that have accrued in the past A. Opportunity costs Sunk costs B. C. D. Financing costs Taxes itself is a non-cash expense and it is affects taxes 10. only relevant because it A. B. C. Depreciation expense Interest expense Capital gain Both A and C D. TO

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