Homework Six

Base all your answers on the course's textbook. Submit your answer form to the week six digital dropbox for week six homework. You can also email me a backup copy from your Tiffin University listed email account. I use the day before the day that I read your email as the submission date (so if I read it on Tuesday, it is considered submitted on Monday). The homework is due Sunday, Feb 24 and the basis for time/date is the eCollege date stamp for dropbox. We are all on Mountain Time. Some student profiles are set for other than Mountain Time so you need to either change your profile to Mountain Time or take this into consideration.

The following homework consists of questions followed by an answer form. All questions for this week are multiple choice or true/false. Questions (2-21) are worth four points each. Question one is worth two points. Fill in the answer form with the letter choice of your answer and submit it as a word document or text document (.txt).

[1] A firm should never accept a project if its acceptance would lead to an increase in the firm's cost of capital (its WACC).
[A] True
[B] False

[2] Because "present value" refers to the value of cash flows that occur at different points in time, a series of present values of cash flows should not be summed to determine the value of a capital budgeting project.
[A] True
[B] False

[3] A basic rule in capital budgeting is that if a project's NPV exceeds its IRR, then the project should be accepted.
[A] True
[B] False

[4] The internal rate of return is that discount rate that equates the present value of the cash outflows (or costs) with the present value of the cash inflows.
[A] True
[B] False

[5] Other things held constant, an increase in the cost of capital will result in a decrease in a project's IRR.
[A] True
[B] False

[6] A project’s IRR is