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1.     Capital budgeting decisions have significant financial effects beyond the current year.

2.     Discounted-cash-flow models focus on a project’s cash inflows and cash outflows without regard to the time value of money.

3.     The cost of capital is equal to the interest expense on the money borrowed for the project.

4.     The net present value model expresses all cash flows in monetary units measured at time zero.

5.     DCF does not focus on net income.
6.     DCF methods are not based on the theory of compound interest.

7.     The NPV method computes the present value of all expected future cash flows using a maximum desired rate of return.
8.     Under the NPV method, the higher the risk of a project, the lower the desired rate of return.
9.     The minimum rate under the NPV method is based on the cost of capital.
10.     A positive NPV means that accepting the project will increase the value of the firm.
11.     When choosing among several investments, managers should pick the one with the lowest net present value.
12.     When using the NPV method, time zero means the value today.
13.     The lower the minimum desired rate of return, the lower the present value of each future cash inflow.
14.     When using the NPV model, a world of uncertainty is assumed.
15.     When using the NPV model, it is assumed that capital markets are perfect.
16.     Depreciating an asset is a cash flow.
17.     The IRR model determines the interest rate at which the NPV equals zero.
18.     If the IRR is less than the minimum desired rate of return, a project is not desirable.
19.     If IRR > minimum desired rate of return, then NPV > 0.

20.     The more sensitive to change a project is, the riskier it is.

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