1. Emily & Olivia Musical Supplies, Inc, should not invest in a project with a NPV of $500,000 if the cost of the money used to finance the project is 9% and the project's internal rate of return (IRR) is 8%.

a. True

b. False

2. The internal rate of return capital budgeting model assumes that the cash flows over the life of a capital budgeting project are reinvested at the firm's cost of capital or if appropriate, risk adjusted discount rate.

a. True

b. False

3. Capital rationing is a process of allocating available long-term financing to acceptable long-term projects.

a. True

b. False