Question

All projects (A to G) are 7-year projects. NPV = Net present value. IRR = internal rate of return. MIRR = modified internal rate of return. PI = profitability index.

	Project A	Project B	Project C	Project D	Project E	Project F	Project G
NPV=	$4,711	($711)	($657)	$334	$9,842	$7,360	($3,224)
IRR=	44.51%	5.47%	8.06%	12.98%	22.56%	17.19%	5.47%
MIRR=	25.23%	7.50%	8.97%	11.57%	16.26%	13.70%	7.50%
PI=	2.178	0.822	0.945	1.028	1.394	1.294	0.871

The discounting rate (r) is 10%.

Which of the following 10 statements are true (there are several, select all that are correct). Consider each statement on its own separate from the others listed:

Question 15 options:

	If projects A & D are mutually exclusive, projects B and C are also mutually exclusive and projects E and F are also mutually exclusive (all others are independent), under the IRR rule projects A, C, and E should be undertaken
	If all projects are mutually exclusive, under the NPV rule only project E should be taken
	If all projects are independent, under the NPV rule, projects A, D, E, and F should be taken
	If all projects are mutually exclusive, under the IRR rule only project E should be taken
	If projects A & B are mutually exclusive, projects C and D are also mutually exclusive and projects F and G are also mutually exclusive (all others are independent), under the MIRR rule all projects should be undertaken
	If projects A & D are mutually exclusive, projects B and C are also mutually exclusive and projects E and F are also mutually exclusive (all others are independent), under the IRR rule projects A, D, E, and E should be undertaken
	If all projects are independent, under the MIRR rule projects A, D, E and F should be taken
	If only projects B and C are mutually exclusive, under the NPV rule only project E should be taken
	If all projects are independent, under the IRR rule, projects B, C and G should be rejected
	If projects A & D are mutually exclusive, projects B and C are also mutually exclusive and projects E and F are also mutually exclusive (all others are independent), under the IRR rule projects A, and E should be undertaken

Answer 1

Statements are True:

• If all projects are mutually exclusive, under the NPV rule only project E should be taken
• If all projects are independent, under the NPV rule, projects A, D, E, and F should be taken
• If all projects are independent, under the MIRR rule projects A, D, E and F should be taken
• If all projects are independent, under the IRR rule, projects B, C and G should be rejected
• If projects A & D are mutually exclusive, projects B and C are also mutually exclusive and projects E and F are also mutually exclusive (all others are independent), under the IRR rule projects A, and E should be undertaken