Capital budgeting involves planning and justifying how money is spent on short-term items like inventory, and payroll…

1. Capital budgeting involves planning and justifying how money is spent on short-term items like inventory, and payroll as well as on long-term projects such as new business ventures, equipment replacement, and expansion. (Points : 5)TrueFalse2. The cost of capital is a single rate that reflects the average return paid to investors who provide the firm’s capital. (Points : 5)TrueFalse3. The NPV decision rules are based on the following statements that follow from the definition of NPV.NPV > 0 , adds shareholder wealthNPV = 0, no change in shareholder wealthNPV < 0, reduces shareholder wealth (Points : 5)TrueFalse4. The internal rate of return is analogous to the yield on a bond, because both are rates that equate inflows with outflows on a present value basis. (Points : 5)TrueFalse5. An assumption implicit in the net present value technique is that all cash flows are reinvested at the cost of capital. (Points : 5)TrueFalse6. Although the NPV method is technically superior, the IRR method is used more frequently. (Points : 5)TrueFalse7. The least risky capital projects are replacements. Expansions and new business ventures are progressively more risky. (Points : 5)TrueFalse8. Which of the following is not a cash flow consideration in evaluating capital budgeting projects? (Points : 5)income taxes on incremental earningsidentifiable incremental overheadincremental accounting profit (net income)depreciation9. When estimating cash flows budgeting projects, (Points : 5)interest expenses incurred to finance the project are includedinterest expense is considered in the cash flow estimates only if the financing is principally from debtinterest expense is never included in the cash flow estimatesnone of the above10. The most difficult part of the capital budgeting process is: (Points : 5)estimation of the incremental project cash flowsapplication of evaluation techniques such as NPV or IRRinterpreting the results of the application of NPV or IRRnone of the above11. Because depreciation is a non-cash expense item, it is not necessary to consider depreciation in estimating cash flows new capital project. (Points : 5)TrueFalse12. An increase in net working capital increases operating cash flows. (Points : 5)TrueFalse13. The incremental cash flow principle claims that sunk costs must be taken into account in the firm's decision whether to accept or reject a project. (Points : 5)TrueFalse14. Basic overheads are usually considered fixed and left out of project analysis. (Points : 5)TrueFalse15. The terms "acquisition" and "takeover" are often used to refer to a merger because the stock of the firm that goes out of existence is usually acquired by the continuing firm. (Points : 5)TrueFalse16. A consolidation occurs when all of the combining legal entities dissolve, and a new entity with a new name is***** continue into the future. (Points : 5)TrueFalse17. Acquiring firms rarely pay more than a small premium over their target's premerger market price, because to do so would be an irrational transfer of wealth to the target's stockholders. (Points : 5)TrueFalse18. If Company F and Company G merge and become Company F, what happens to the stockholders of Company G? (Points : 5)They become stockholders of Company F.They are paid shares of Company G.They lose their investment.Either a. or b.Any of the above could occur.19. The category of business combination where the firms have a supplier-customer relationship is known as a (Points : 5)vertical merger.horizontal merger.conglomerate merger.none of the above20. A combination of companies that compete directly is a (Points : 5)conglomerate merger.vertical merger.horizontal merger.takeover