1. Emily & Olivia Musical Supplies, Inc, should not invest in a project with a NPV of $500,000 if the cost of the money used to finance the project is 9% and the project's internal rate of return (IRR) is 8%.
a. True
b. False
2. The internal rate of return capital budgeting model assumes that the cash flows over the life of a capital budgeting project are reinvested at the firm's cost of capital or if appropriate, risk adjusted discount rate.
a. True
b. False
3. Capital rationing is a process of allocating available long-term financing to acceptable long-term projects.
a. True
b. False