The following are all True and False Questions: 1. Book Value represents the rem

Question

The following are all True and False Questions:

1. Book Value represents the remaining underpreciated investment on the books after the depreciation charges to date have been subtracted

2. For the same interest rate, compounding interest does not always yield a larger future worth value than a simple interest rate

3. For any project, if its present worth is negative, the project will be rejected

4. The capatalized cost of a finite-life alternative can be obtained by calculating its annual worth over one life cycle and then multiplying by the interest rate

5. The depreciation amount is not directly included in CFBT (Cash Flow Before Tax), but depreciation is directly invlolved in the taxable calculation

6. Using incremental analysis of alternatives, the alternatice with the highest B/C ratio is selected.

7. Plotting PW vs i can be used to determine the IRR for a given project.

8. In conducting an incremental analysis, at any round, two alternatives can be compared and the alternative with the highest internal rate of return can be selected for comparison in the next round.

Explanation / Answer

1) True

2) True (if duration = 1 period of compounding)

3) False (In general this is true, but Not necessarily.. If the project is a necessity or required project, then we can't reject it. But if there is a choice, we will reject it)

4) False. (We divide it by the interest )

5) True

6) False. The ratio should also be greater than or equal to 1

7) True. IRR is the i when NPV = 0 or initial investment = present woth of cash flows

8) False. (Highest Present worth is chosen)

Related Questions

Navigate

• Browse (All)
• Browse T
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.