Answer: TRUELevel of Difficulty: 4Learning Goal: 6Topic: Internal Rate of Return31.In capital budgeting, the preferred approaches in assessing whether a project is acceptable integrate time value procedures, risk and return considerations, valuation concepts, and the required payback period.Answer: FALSELevel of Difficulty: 2Learning Goal: 1Topic: Capital Budgeting Techniques32.If the payback period is less than the maximum acceptable payback period, we would reject a project.Answer: FALSELevel of Difficulty: 2Learning Goal: 2Topic: Payback Method33.If the payback period is less than the maximum acceptable payback period, we would accept a project.Answer: TRUELevel of Difficulty: 2Learning Goal: 2Topic: Payback Method34.If the payback period is greater than the maximum acceptable payback period, we would reject a project.Answer: TRUELevel of Difficulty: 2Learning Goal: 2Topic: Payback Method35.If the payback period is greater than the maximum acceptable payback period, we would accept a project.Answer: FALSELevel of Difficulty: 2Learning Goal: 2Topic: Payback Method

410 Gitman • Principles of Finance,Eleventh Edition36.The payback period of a project that costs $1,000 initially and promises after-tax cash inflows of $300 for the next three years is 3.33 years.Answer: TRUELevel of Difficulty: 2Learning Goal: 2Topic: Payback Method37.The payback period of a project that costs $1,000 initially and promises after-tax cash inflows of $300 for the next three years is 0.333 years.Answer: FALSELevel of Difficulty: 2Learning Goal: 2Topic: Payback Method38.The payback period of a project that costs $1,000 initially and promises after-tax cash inflows of $3,000 for the next three years is 0.333 years.Answer: TRUELevel of Difficulty: 2Learning Goal: 2Topic: Payback Method39.The payback period of a project that costs $1,000 initially and promises after-tax cash inflows of $3,000 for the next three years is 3.33 years.Answer: FALSELevel of Difficulty: 2Learning Goal: 2Topic: Payback Method40.A sophisticated capital budgeting technique that can be computed by subtracting a project’s initial investment from the present value of its cash inflows discounted at a rate equal to the firm’s cost of capital is called net present value.Answer: TRUELevel of Difficulty: 2Learning Goal: 3Topic: Net Present Value41.A sophisticated capital budgeting technique that can be computed by subtracting a project’s initial investment from the present value of its cash inflows discounted at a rate equal to the firm’s cost of capital is called internal rate of return.Answer: FALSELevel of Difficulty: 2Learning Goal: 3Topic: Net Present Value

Chapter 8 Capital Budgeting Cash Flows 41142.If the NPV is greater than the cost of capital, a project should be accepted.Answer: FALSELevel of Difficulty: 2Learning Goal: 3Topic: Net Present Value43.If the NPV is greater than the initial investment, a project should be accepted.