Question

If a firm considers two separate projects but is only able to accept one of the projects due to the fact that each project would require exclusive use of the Company’s manufacturing machinery, these projects are considered to be:

Select one:

a. Independent

b. Interdependent

c. Mutually exclusive

d. Mutually inclusive

e. Operationally distinct

Internal rate of return (IRR) is defined as the:

Select one:

a. discount rate which causes the net present value of a project to equal zero.

b. rate of return a project will generate if the project in financed solely with internal funds.

c. discount rate that equates the net cash inflows of a project to zero.

d. maximum rate of return a firm expects to earn on a project.

e. discount rate that causes the profitability index for a project to equal zero.

Answer 1

1. option "C" is correct, i.e., Mutually exclusive.

Independent projects are the projects whose acceptance or rejection is independent of the acceptance or rejection of other projects.

Interdependent Project  is a term used to denote a situation when two or more projects are related to each other in certain ways (they depend on each other somehow).

Mutually inclusive projects allows both projects to occur intogether.

2. Option "A" is correct, i.e, IRR is the discount rate which causes the net present value of a project to equal zero.