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pretax cost of debt because most corporations pay taxes at the same tax
rate.
aftertax cost of debt because interest is tax deductible.
pretax cost of debt because it is the actual rate the firm is paying
bondholders.
current yield because it is based on the current market price of debt.
pretax yield to maturity because it considers the current market price of
debt.
37.All else constant, the net present value of a typical investment project
increases when:
all cash inflows occur during the last year instead of periodically throughout
a project’s life.
each cash inflow is delayed by one year.
the initial cost of a project increases.
the discount rate increases.
the rate of return decreases.
38.Graham and Harvey (2001) found that _____ were the two most
popular capital budgeting methods.
IRR and payback
IRR and NPV
discounted payback and NPV
IRR and modified IRR
NPV and PI
39.The primary reason that company projects with positive net present
values are considered acceptable is that:
they return the initial cash outlay within three years or less.
the investment's cost exceeds the present value of the cash inflows.
they create value for the owners of the firm.
the project's rate of return exceeds the rate of inflation.
the required cash inflows exceed the actual cash inflows.
40.fitability index of an investment project is the ratio of the:
net present value of the project’s cash outflows divided by the net present
value of its inflows.
net present value of every project cash flow to the initial cost.
present value of the Time 1 and subsequent cash flows to the initial cost.
internal rate of return to the current market rate of interest.
average net income to the average investment.
41.No matter how many forms of investment analysis you employ:
the internal rate of return will always produce the most reliable results.
only the first three years of a project ever affect its final outcome.