Question 1) ________ is at the heart of corporate finance, because it is concerned with

1) ________ is at the heart of corporate finance, because it is concerned with making the best choices about project selection.

A) Capital budgeting B) Capital structure C) Payback period

D) Short-term budgeting

2) The ________ model is usually considered the best of the capital budgeting decision-making models. A) Internal Rate of Return (IRR)

B) Net Present Value (NPV) C) Profitability Index (PI)

D) Discounted Payback

3) We can separate short-term and long-term decisions into three dimensions. Which of the below is NOT one of these?

A) Degree of information gathering prior to the decision B) Cost

C) Personality of CEO making the decisions D) Length of impact

4) Because money is limited, companies must be careful to choose projects that are feasible and profitable.

5) Capital budgeting decisions are typically long-term decisions.

6) Name and describe three key observations that we can make about the capital budgeting decision.

1) .

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9.2 Payback Period

1) The ________ model answers one basic question: How soon will I recover my initial investment? A) Payback Period

B) IRR C) NPV

D) Profitability Index

2) The ________ model determines at what point in time cash outflow is recovered by the corresponding future cash inflow.

A) NPV

B) Buyback

C) Net Present Value D) Payback Period

3) Consider the following four-year project. The initial after-tax outlay or after-tax cost is $1,000,000. The future after-tax cash inflows for years 1, 2, 3 and 4 are: $400,000, $300,000, $200,000 and $200,000, respectively. What is the payback period without discounting cash flows?

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