Question1. Depreciating the asset using a straight line method means?
A. lessening its value on the books by the same amount each year till it reaches $0.
B. Adding back depreciation to net income in order to acquire cash flow.
C. Using a set of depreciation tables to determine what must be expensed per year.
D. Dividing an asset's initial value by cost of capital.
Question2. When the net present value (NPV) of the potential investment project is $1.2 million when the cost of capital is 9.0%, then what do you know regarding IRR?
A. IRR should be 9.0%.
B. IRR is less than cost of capital.
C. IRR is greater than cost of capital.
D. We have to first compute IRR using a spreadsheet function.
Question3. When a financial analyst or manager has done a technical appropriate job of estimating cash flows, cost of capital and NPV, then.
A. the decision to pursue a project is easy one, based on whether NPV is positive.
B. the decision whether to pursue a capital budgeting project might still depend on non-financial factors, like the relationship dynamics of executive team, politics among board members, or other potential human action issues.
C. the decision to pursue a capital investment project is relatively easy, so long as IRR is greater than the cost of capital.
D. the decision to pursue project is easy one, based on whether NPV is largest of competing NPVs.