1. An appropriate discount rate for the depreciation tax shield is the risk-free rate.

True

False

2. In capital budgeting which of the following is true?

a. All of THESE

b. The amount of depreciation allowed is based on income tax law rules.

c. The initial investment in net working capital will be recovered at the end of the projects life.

d. The salvage value of the investment should include payment of taxes.

For independent projects (with not capital constraints) and with same useful life, the right decision is to accept a project or projects ________.

a. with IRR greater than the discount rate

b. with a profitability index greater than 1.0

c. All of THESE

d. with NPV greater than zero