Which one of the following capital-budgeting evaluation techniques is based on finding a discount rate which causes the net present value to be zero?

The internal rate for return falls below the cost of capital when the net value of the asset is negative.

The Internal Rate of Return (IRR), is the discount rate at which the Net Present Value (NPV), becomes zero.

Capital-budgeting is an evaluation method that relies on finding a discounted rate so that the net present value is zero. This is called internal rate of Return (IRR).

An examination of a firm’s opportunities, strengths, threats and weaknesses is often referred to by the acronym SWOT.

Capital budgeting is the process of identifying, evaluating, and implementing a firm’s investment opportunities.

Sunk costs do not count in cash flow calculations.

Implementation is the stage within the capital budgeting cycle in which all projects accepted need to be completed in a timely manner.

The identification stage starts the capital-budgeting procedure.

The corporate planning tool that develops project plans that fit well with the firm’s plans is often referred to by the acronym GOMS (Goals, Objectives, Methods, and Standards).

If the project’s net present value is negative, then the internal rate for return will be lower than the capital cost.

As a percentage GDP, corporate debt grew to almost 50% from 35% in 1970.

There are three things that influence growth. These can be seen in the relationships of internal growth and sustainability growth rates. Profitability is the exception.

The primary impact of increasing the amount of debt to be used is to lower capital cost.

One concept that stands out from all the rest is net profit margin.

The cost of equity increases when the retained earnings are exhausted and new stock is issued.

The firm’s target capital structure is consistent with minimum weighted average cost of capital.

A firm’s degree of combined leverage can be measured as degree of operating leverage plus the degree of financial leverage.

Both the target and optimal capital structures need to be equal.

The average cost of debt is higher than preferred stock and should be adjusted for an after-tax cost.

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