Companies often use several methods to evaluate the project's cash flows and each of them has its benefits and disadvantages. Pl
ease select which of the following conclusions about capital budgeting are valid?
1. Managers have been slow to adopt the IRR, because percentage returns are a harder concept for them to grasp
2. For most firms, the reinvestment rate assumption in the NPV is more realistic than the assumption in the IRR.
3. The discounted payback period improves on the regular payback period by accounting for the time value of money
True or false: Sophisticated firms use only the NPV method in capital budgeting decisions
1. Managers have been slow to adopt the IRR, because percentage returns are a harder concept for them to grasp
2. For most firms, the reinvestment rate assumption in the NPV is more realistic than the assumption in the IRR.
3. The discounted payback period improves on the regular payback period by accounting for the time value of money
True or false: Sophisticated firms use only the NPV method in capital budgeting decisions
1 answer:
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