1. The net present value method considers the time value of money.

a. The cost of capital is the companys desired rate of return

b. The internal rate of return method does not consider the time value of money

c. Capital budgeting methods produce the same decision and their use is based on the information available.

2. Which of the following capital decision methods ignores the cash flows after the original investments is recovered?

a. Net present value

b. Payback method

c. Internal rate of return

3. Which of the following capital decision methods computes the projects unique rate of return and considers the time value of money?

a. Net present value

b. Internal rate of return

c. Payback method

4. Which of the following capital decision methods shows the excess or deficiency of the assets present value of net cash inflows over its initial investment cost?

a. Internal rate of return

b. Net present value

c. Payback method

5. Accept the investment proposal if the net present value of the investment is positive and the company is not under the constraint of capital rationing (shortage of funds).

a. True

b. False