Capital Budgeting Paper 13

1

Which one of the following methods for evaluating capital projects is the least useful from an investment analysis point of view?






2

Despite its shortcomings, the traditional payback period continues to be a popular method to evaluate investments because, in part, it






3

Which one of the following is not a shortcoming of the payback method?






4

A proposed capital budgeting project requires an initial investment of $95,000. The subsequent annual cash flows from the project of $40,000 are expected to last for 7 years and be received at the end of each year. If the cost of capital is 20%, the discounted payback period of the project is






5

Which one of the following is an advantage of the use of the payback method for capital budgeting?






6

Which one of the following statements about the payback method is correct?






7

A proposed capital budgeting project has a discounted payback period of 5 years when a 10% cost of capital is used. The project has cash flows that will be positive for Years 1 through 7. The undiscounted payback period of the project is






8

Barker, Inc., has no capital rationing constraint and is analyzing many independent investment alternatives. Barker should accept all investment proposals






9

The profitability index approach to investment analysis






10

If an investment project has a profitability index of 1.15, the






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