Question 16 (4 points)

[Select all relevant.]

A negative NPV implies that:

Question 16 options:

	the required rate of return will not be achieved.
	the investment will actually decrease shareholder wealth.
	none of these.
	the investment will not increase shareholder wealth.
	the present value of expected cash outflows is greater than the present value of expected cash inflows

Deficiencies of the simple (undiscounted) payback period method include:

Question 12 options:

	an arbitrary cutoff date, with no economic basis.
	disregard for cash flows after the payback period.
	disregard for cash outflows.
	none of these. Payback is the best capital budgeting method of all.
	disregard for the time value of money.

The firm's marginal cost of capital is the:

Question 1 options:

	weighted average of the cost of the debt and equity provided to the company by all investors and creditors.
	discount rate used to evaluate the cash flows of capital budgeting projects with the same risk as the firms existing assets.
	none of these.
	rate of return the firm must earn on its investments, in order to maintain its stock price.
	minimum rate of return that investors require for providing capital to the company.