1. Although there is no truly risk free investment, we sometimes use the return on ___ as a risk free rate of return.
a. A stock with a low beta
b. A stock with a high beta
c. corporate bonds
d. short term debt of the US government
2. A start up company might use the payback period, rather than NPV, to evaluate capital budgeting project because
a. Such a firm might need funds and have difficulty raising additional money
b. Payback deals with accounting profits and is thus a good indicator of which capital budgeting projects to accept
c. Payback does a better job than NPV in taking time value of money into consideration
d. All of the above are reasons for a start up to prefer payback over NPV