Reference no: EM131073258

True or false:

1) other things the same, the use of debt financing rdeuces the firm's total tax bill resulting in a higher market value.

2) accounting profits are used to make capital budgeting decisions because generally accepted accounting principles ensure that profits are the best measure of a company's economic activity.

3) as production levels increase, fixed costs stay the same in total, but decrease on a per unit basis

4) a decrease in the level of production results in decreased fixed cost per unit

5) a company that sells common stock and uses the money to pay off a loan is increasing its use of financial leverage.

6) the initial outlay for a new project is an example of an opportunity cosr

7) the guiding rule in deciding if a free cash flow is incremental is to look at a company with, versus without, the new project

8) a company that sells preferred stock and uses the money to pay off a loan is decreasing its amount of financial leverage

9) Jones Blanket Co. Sells blankets for $25 each. The variable cost per blanket is $10 each. If fixed cost is $4,500,000 then the break-even point is 300,000 units.

10) if a project is acceptable using the net present value criteria, then it will also be acceptable under the less stringent criteria of the payback period

11) if a firm imposes a capital constraint on investment projects, the appropriate decision criterion is to select the set of projects that has the highest positive net present value subject to the capital constraint.