Question

Question text Which of the following statements is INCORRECT? Select one: a. When choosing between mutually...

Question text

Which of the following statements is INCORRECT?

Select one:

a. When choosing between mutually exclusive projects, managers should accept all projects with IRRs greater than the weighted average cost of capital.

b. For independent projects, the decision to accept or reject will always be the same using either the MIRR method or the NPV method.

c. One of the disadvantages of choosing between mutually exclusive projects on the basis of discounted payback method is that you might choose the project with the faster payback period but with lower total return.

d. The IRR method is appealing to some managers because it produces a rate of return upon which to base decisions rather than a dollar amount like the NPV method.

e. When choosing between mutually exclusive projects, managers should accept projects with higher positive NPVs.

Business   Finance   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

The INCORRECT statements is:

a. When choosing between mutually exclusive projects, managers should accept all projects with IRRs greater than the weighted average cost of capital.

Reason: In capital budgeting, mutually-exclusive projects refer to a set of projects out of which only one project can be selected for investment. A decision to undertake one project from mutually exclusive projects excludes all other projects from consideration. Hence, the underline part in the above statement makes it INCORRECT.

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
11) Your company is choosing between two MUTUALLY EXCLUSIVE projects that have a required rate of...
11) Your company is choosing between two MUTUALLY EXCLUSIVE projects that have a required rate of return of 8.25%. You have gathered the following data. Which of the project(s) should be accepted? IRR NPV Project A 6.40% $ 22.6 million Project B 8.50% $ 16.1 million A) Accept neither project, as both have a required return that is above the IRR. B) Accept project B with the higher IRR. C) Accept project A with the higher NPV. D) Accept both...
Which of the following statement is correct? Select one: a. All the answers are incorrect. b....
Which of the following statement is correct? Select one: a. All the answers are incorrect. b. A positive NPV means that the firm’s value will decrease if the project is adopted because the new project’s estimated return is lesst than the firm’s required rate of return. c. Reject the project if the IRR is greater than or equal to the required rate of return. d. Payback period is the discount rate that forces the NPV to equal zero. e. All...
Which of the following is not a net present value (NPV) decision rule? A        When choosing...
Which of the following is not a net present value (NPV) decision rule? A        When choosing among independent projects, select the one with the highest rate of return B        If an independent investment’s NPV is negative, reject the project C        If an independent investment’s NPV is positive, accept the project D        When choosing among mutually exclusive projects, select the one with the highest NPV
Which one of the following is False when it comes to IRR? Multiple Choice It can...
Which one of the following is False when it comes to IRR? Multiple Choice It can be intuitively appealing because it presents its results as a percentage rather than a dollar amount It is not as reliable as NPV when looking at mutually exclusive projects It will always yield more than 1 result when NPV is negative It will always agree with NPV for projects where all cash flows beyond Year 0 are positive as long as the project is...
The decision process Before making capital budgeting decisions, finance professionals often generate, review, analyze, select, and...
The decision process Before making capital budgeting decisions, finance professionals often generate, review, analyze, select, and implement long-term investment proposals that meet firm-specific criteria and are consistent with the firm’s strategic goals. Companies often use several methods to evaluate the project’s cash flows and each of them has its benefits and disadvantages. Based on your understanding of the capital budgeting evaluation methods, which of the following conclusions about capital budgeting are valid? Check all that apply. For most firms, the...
When mutually exclusive projects have different lives, a company should select the project with the ____...
When mutually exclusive projects have different lives, a company should select the project with the ____ Highest IRR Longest life Lowest equivalent annual cost Highest NPV discounted at the cost of capital
1. Multiple internal rates or return occur when: Select one: A. The project’s cash flows are...
1. Multiple internal rates or return occur when: Select one: A. The project’s cash flows are larger earlier in the life of the project. B. The project’s cash flows are larger later in the life of the project. C. When the project’s cash flows experience normal cash flow streams (i.e. one sign change). D. When the project’s cash flows experience non-normal cash flow streams (i.e. two or more sign changes). E. When the IRR is equal to the WACC. 2....
Which of the following statement is correct? a. A firm should never accept the independent projects...
Which of the following statement is correct? a. A firm should never accept the independent projects having NPVs greater than zero. b. All the answers are incorrect. c. Because the net present value method does not factor in the time value of money, nor the cash flows after the payback period, its usefulness is limited. d. Mutually exclusive projects are the projects that do not have the same task and therefore they do not compete with each other. e. The...
Which of the following statements is INCORRECT regarding capital budgeting tools? If the NPV is positive,...
Which of the following statements is INCORRECT regarding capital budgeting tools? If the NPV is positive, the Profitability Index must be greater than 1. If the IRR is greater than the required return, then the NPV will be positive. The discounted payback period will always be smaller than the payback period. The NPV is the best capital budgeting tool, as a general rule.
Which of the following statement is incorrect? Select one: a. When the internal rate of return...
Which of the following statement is incorrect? Select one: a. When the internal rate of return is less than this required rate of return, the project is rejected. b. When NPV equals zero, the required rate of return, or discount rate used in the NPV calculation, is greater than the projected rate of return, IRR. c. Most of the answers are correct. d. The number of time periods it takes to cover the initial investment is called the payback period....
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT