13 Jun 2019

Mark the statements below as true or false:

-Because investors like dividends, the higher the company's dividend growth rate, the lower the company's cost of common equity.

-Both the profitability index (PI) and net present value (NPV) are based on the present value of all future free cash flows, but the PI is a relative measure while the NPV is an absolute measure of a project's desirability.

-If a project is acceptable using the NPV criteria, it will also be acceptable when using the profitability index and IRR criteria.

-If a project's IRR is equal to its required return, then the project's NPV is equal to zero and its PI is equal to one.

-In order to create value a corporation must earn a rate of return on its invested capital that is higher than the market's required rate of return on that invested capital.

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Reid Wolff
Reid WolffLv2
16 Jun 2019

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