Diff1 terms capitalbudgeting objective 2 aacsb

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Unformatted text preview: estment is made, there is a follow-up wherin the realized cash flows are tracked, compared against the estimates, and plans are revised if necessary. Diff: 1 Terms: capital budgeting Objective: 2 AACSB: Analytical skills 8) Discounte flow methods measure all the expected future cash inflows and outflows of a project as if they occurred at equal intervals d cash over the life of the project. Answer: FALSE Explanation: As if they occurred at a Diff: 2 Terms: discounted cash flow (DCF) methods Objective: 3 AACSB: Analytical skills 9) Discounte d cash flow methods focus on operating income. Answer: FALSE Explanation: Discounted cash flow methods focus on cash inflows and cash outflows. Diff: 2 Terms: discounted cash flow (DCF) methods Objective: 3 AACSB: Analytical skills 10) The three common discounted cash flow methods are net present value, internal rate of return, and payback. Answer: FALSE Explanation: The two common discounted cash flow methods are net present value and internal rate of return. The traditional payback method is not a discounted cash flow method. Diff: 2 Terms: discounted cash flow (DCF) methods Objective: 3 AACSB: Reflective thinking 11) The net present value method calculates the expected monetary gain or loss from a project by discounting all expected future cash inflows and outflows to the present point in time using the hurdle rate. Answer: TRUE Diff: 2 Terms: net present value (NPV) method, hurdle rate Objective: 3 AACSB: Reflective thinking 12) Internal rate of return is a method of calculating the expected net monetary gain or loss from a project by discounting all expected future cash inflows and outflows to the present point in time. Answer: FALSE Explanation: The internal rate of return calculates the discount rate at which the present value of expected cash inflows from a project equals the present value of expected cash outflows. Diff: 2 Terms: internal rate-ofreturn (IRR) method Objective: 3 AACSB: Reflective thinking 13) A capital budgeting project is accepted if the required rate of return equals or exceeds the internal rate of return. Answer: FALSE Explanation: A capital budgeting project is accepted if the internal rate of return...
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