1. Which of the following statements is FALSE?
a. The payback period tends to ignore the later cash flows.
b. The payback period is useful as a rough measure of a project's liquidity.
c. The payback period ignores the time value of money.
d. The payback period depends on the cost of capital (WACC).
2. Which of the following statements is FALSE?
We need to know the cost of capital (WACC) in order to use the NPV rule.
If the cost of capital (WACC) is less than the IRR, the NPV will be positive.
In order to maximize shareholder wealth, reject capital budgeting projects with a negative NPV.
When faced with a set of alternative investments, choose the one with the lowest NPV in order to minimize the present value of the costs.