1. Net Present Value Technique

I. none of the above.

II. uses all the cash flows of a project when computing the net present value

III. is consistent with the goal of shareholder wealth maximization

IV. all of the above

2. V.consider time value of money in evaluating projects

We compute the profitability index of a capital budgeting proposal by

I. multiplying the internal rate of return by the cost of capital

II. dividing the present value of the annual after tax cash flows by the cost of capital

III. dividing the present value of the the annual after tax cash flows by the initial investment

IV. multiplying the cash inflow by the internal rate of return

V. None of the above   

3. The internal rate of return is:

I. The discount rate that makes NPV negative and the PI greater than one

II. The discount rate that makes the NPV positive.

III. none of the above

IV. The discount rate that equates the present value of the cash inflows with the initial investment

V. The rate of return that makes the NPV positive.