The present value of a given sum to be received in five years will be exactly twice as great as the present value of an equal sum to be received in ten years.

True/False

1. F Medium	The present value of a given sum to be received in five years will be exactly twice as great as the present value of an equal sum to be received in ten years.
2. F Medium	An increase in the discount rate will result in an increase in the present value of a given cash flow.
3. T Easy	The present value of a cash flow decreases as it moves further into the future.
4. F Medium	When the net present value method is used, the internal rate of return is the discount rate used to compute the net present value of a project.
5. F Medium	If net present value is negative, then interpolation is needed in order to make a proposed investment acceptable.
6. T Medium	The net present value method assumes that cash flows from a project are immediately reinvested at a rate of return equal to the discount rate.
7. F Easy	When using internal rate of return to evaluate investment projects, if the internal rate of return is less than the required rate of return, the project should be accepted.
8. T Easy	The internal rate of return for a project is the discount rate that makes the net present value of the project equal to zero.
9. T Medium	In comparing two investment alternatives, the difference between the net present values of the two alternatives obtained using the total cost approach will be the same as the net present value obtained using the incremental cost approach.
10. T Easy	The payback period is the length of time it takes for an investment to recoup its own initial cost out of the cash receipts it generates.

11. F Medium	Projects with shorter payback periods are always more profitable than projects with longer payback periods.
12. F Easy	The payback method of making capital budgeting decisions gives full consideration to the time value of money.
13. F Easy	If new equipment is replacing old equipment, any salvage received from sale of the old equipment should not be considered in computing the payback period of the new equipment.
14. F Easy	One strength of the simple rate of return method is that it takes into account the time value of money in computing the return on an investment project.
15. T Easy	The preference rule for ranking projects by the profitability index is: the higher the profitability index, the more desirable the project.