TRUE or FALSE? If there is more than change in the sign of the cash flows, the
Question:
TRUE or FALSE?
If there is more than change in the sign of the cash flows, the project may have several IRRs or no IRRs at all.
When there are more than one opportunity cost of capital for each year’s cash flow, we should set a simple yardstick for evaluating the IRR of a project.
The approval of a capital budget allows managers to go ahead with any project included in the budget.
MM’s proposition 1 says that corporate borrowing increases earnings per share but reduces the prices the price-earnings ratio.
If a project has positive NPV, the firm should always invest immediately.
If a firm uses a single cutoff period for all projects, it is likely to accept too many short-lived projects.
The more debt the firm issues, the higher the interest rate it must pay. That is one important reason why firms should operate at conservative debt levels.
MM’s proposition 2 assumes that increased borrowing does not affect the interest rate on the firm’s debt.
Borrowing does not increase financial risk and the cost of equity if there is no risk of bankruptcy.
Expert Answer:
1 True Non conventional cash flows with non continuos pattern of income leads to multiple I... View the full answer
