Question

Which of the following statements is correct:

A. projects with unconventional cash flows have multiple internal rates of return

B. if 2 projects are mutually exclusive, you should select the project with the shortest payback period

C. If the IRR exceeds the required return, the profitability index will be less than 1.0

D. the Profitability index will be greater than 1.0 when the net present value is negative

E. when the internal rate of return is greater than the required return, the net present value is negative.

Answer #1

**Option A and
B** is correct

**A: I**f 2 projects are mutually exclusive, you
should select the project with the shortest payback period -
Correct

**B:** Projects with unconventional cash flows have
multiple internal rates of return - where cash flows will have more
than one different cash flow signs hence

>>>>>

**C:** The Profitability index will be greater than
1.0 when the net present value is negative - wrong,

since net present value will be positive if profitability index is greater than 1.0

**D:** When the internal rate of return is greater
than the required return, the net present value is negative -
Wrong

Since net present value is positive if internal rate of return is greater than required return

Which one of the following statements is
TRUE?
Group of answer choices
When the required return is less than the internal rate of
return, net present value is positive.
When the IRR is greater than the required return, the net
present value is negative.
If projects are mutually exclusive, you should always select the
project with the greatest IRR.
Projects with conventional cash flows have multiple internal
rates of return.

In projects with unconventional cash flows (negative and
positive cash flows throughout the life of the project), the
phenomenon of multiple rates of return can occur. In these cases,
the internal rate of return (IRR) is the most appropriate method of
project evaluation.
a. True
b. False

11. You are considering two independent projects
both of which have been assigned a discount rate of 15 percent.
Based on the NPV rule, what is your recommendation concerning these
projects?
(a) You should accept both projects.
(b) You should reject both projects.
(c) You should accept project A and reject project B.
(d) You should accept project B and reject project A.
(e) None of the above is correct.
12. New Labs just announced that it has...

11.
The discount rate that makes the net present value of an
investment exactly equal to zero is the:
A)
Payback period.
B)
Internal rate of return.
C)
Average accounting return.
D)
Profitability index.
E)
Discounted payback period.
12.
The internal rate of return (IRR) rule can be best stated
as:
A)
An investment is acceptable if its IRR is exactly equal to its
net present value (NPV).
B)
An investment is acceptable if its IRR is exactly equal to...

For independent projects with conventional cash flows, which of
the following can we use as a requirement for the project to be
accepted?
Multiple Choice
PI greater than 1.0
AAR lower than the required rate
Payback period that exceeds the requirement
Required discount rate greater than the IRR
Discounted payback period less than the payback period

In mutually exclusive projects, project that is selected for
comparison with others must have
a. Internal rate of return greater than zero
b. Positive net present value
c. Zero net present value
d. Highest net present value
e. Shortest discounted pay back

The internal rate of return method of analysis
a. May produce multiple rates of return when cash flows are
conventional
b. May lead to incorrect decisions when comparing mutely
exclusive projects
c Is rarely used in the business world today
d Is the preferred method of analysis when projects are either
mutually exclusive or have unconventional cash flows
e Is dependent upon prespecified rates used to discount the cash
flows

If mutually exclusive projects with normal cash flows are being
analyzed, the net present value (NPV) and internal rate of return
(IRR) methods agree.
Projects Y and Z are mutually exclusive projects. Their cash
flows and NPV profiles are shown as follows.
Year
Project Y
Project Z
0
–$1,500
–$1,500
1
$200
$900
2
$400
$600
3
$600
$300
4
$1,000
$200
If the weighted average cost of capital (WACC) for each project
is 14%, do the NPV and...

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...

Modified internal rate of return:
handles both the multiple IRR problem and the mutually exclusive
projects problem.
handles the mutually exclusive projects problem.
does not requires the use of a discount rate.
does not handle the reinvestment rate
assumption problem.
handles the multiple IRR problem .

ADVERTISEMENT

Get Answers For Free

Most questions answered within 1 hours.

ADVERTISEMENT

asked 8 minutes ago

asked 9 minutes ago

asked 9 minutes ago

asked 20 minutes ago

asked 46 minutes ago

asked 56 minutes ago

asked 1 hour ago

asked 1 hour ago

asked 1 hour ago

asked 1 hour ago

asked 1 hour ago

asked 1 hour ago