Indicate Whether Each of the Following Statements Is True or False

question 70

Short Answer

Indicate whether each of the following statements is true or false.
If two capital investments both have positive net present values,both offer an actual rate of return that is higher than the required rate of return.______
Company M has two potential capital investments,each of which has a positive net present value.M can only accept one of the investments.In this situation,it should always accept the project that has the higher net present value.______
Net present value is calculated by dividing the present value of cash inflows by the present value of cash outflows associated with a capital investment.______
The present value index can be used to compare different capital investment projects.______
The higher the present value index,the lower the rate of return per dollar invested in the project.______

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Definitions:

Risk-free Asset

An investment that is expected to return its full original value along with a specified interest rate with virtually no risk of financial loss.

Beta

An evaluation of the unsteadiness, or systematic jeopardy, of a security or collective financial investments when compared to the market as a whole.

CAPM

The Capital Asset Pricing Model, a formula used to determine the theoretical expected return of an investment given its risk relative to the market.

Risk-free Asset

An investment with zero risk of financial loss, typically considered to be government bonds.