1. Capital budgeting involves planning and justifying how money is spent on short-term items like inventory, and payroll as well as on long-term projects such as new business ventures, equipment replacement, and expansion. (Points : 5) True False 2. The cost of capital is a single rate that reflects the average return paid to investors who provide the firm’s capital. (Points : 5) True False 3. The NPV decision rules are based on the following statements that follow from the definition of NPV. NPV > 0 , adds shareholder wealth NPV = 0, no change in shareholder wealth NPV
