10. Capital budgeting cash flows should include all of the following EXCEPT: A.

Question

10. Capital budgeting cash flows should include all of the following EXCEPT: A. incremental costs. B. after tax costs. C. opportunity costs. D. interest costs. 11. If a bond's quality rating decreases, you would expect the investor's required rate of return on this bond to A. increase. B. decrease. C. remain the same. D. first decrease rapidly, then increase. 12. Which of the following methods of evaluating capital investment proposals computes the rate that yields a net present value of zero for an investment? A. payback. B. net present value. C. internal rate of return. D. none of the above. 13. The _____ capital budgeting method assumes cash flows are reinvested at the cost of capital. A. payback. B. internal rate of return. C. net present value. D. none of the above. 14. Interest rates and bond prices A. move in the same direction. B. move in opposite directions. C. sometimes move in the same direction, sometimes move in opposite directions. D. have no relationship with each other. They are independent.

Explanation / Answer

10) A. incremental costs.

11) A. increase.

12) C. internal rate of return.

13) C. net present value

14) B. move in opposite directions

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