1.Which of the following statements is false regarding the investment decision rules? (A) The internal rate of return (IRR) rule works for a stand-alone project if all of the project's negative cash flows precede its positive cash flows. (B) There are situations in which IRRs do not exist. (C)If a change in the timing of the cash flows does not affect the net present value (NPV), then the change in timing will not impact the IRR. (D)The incremental IRR tells us the discount rate at which it becomes profitable to switch from one project to the other. (E)Problems arise using the IRR rule when the mutually exclusive investments have different scales.

5. Which of the following statements is false regarding the corporate payout policy? (A)Because long-term investors can defer the capital gains tax until they sell, there is a tax advantage for share repurchases over dividends. (B) Managers are much Iess committed to dividend payments than to share repurchases. (C) The dividend-capture theory states that in absence of transaction costs, investors can trade shares at the time of the dividend so that non-taxed investors receive the dividend. (D)Differences in tax preferences create clientele effects, in which the dividend policy of a firm is optimized for the tax preference of its investor clientelc. (E)While many investors have a tax preference for share repurchases rather than dividends, the strength of that preference depends on the difference between the dividend tax rate and the capital gain tax rate that they face.

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