1. Which of the following statement is correct?

a. All the answers are incorrect.

b. If the number of periods increases, present value decreases.

c. Annuities in which the cash flows occur at the end of each of the unspecified time periods are known as annuities due.

d. With an amortized loan, after the last payment is made, still the remaining interest on interest and simple interest on principal on the loan have to be paid.

2. Which of the following statement is incorrect?

a. A project’s net present value is the number of time periods it will take before the cash inflows of a proposed project equal the amount of the initial project investment (a cash outflow).

b. Most of the answers are correct.

c. The change in firm value due to taking on a capital budgeting project may be positive, negative, or zero, depending on the NPV value.

d. Payback Period shows how many years take to recoup the initial investment.

e. Independent projects are the projects that do not compete with each other.