Question

Which of the following is statements related to capital budgeting is not true? A project is...

Which of the following is statements related to capital budgeting is not true? A project is considered acceptable if its NPV is greater zero. A project whose NPV is greater than its IRR is should be accepted. Both the NPV method and the IRR method of evaluating capital investment projects are widely considered to be superior to the payback method. An NPV of zero signifies that the project's cash flows are just sufficient to repay the invested capital and to provide the required rate of return on that capital.

Business   Finance   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

A project whose NPV is greater than its IRR is should be accepted.- False

(NPV rule states that NPV should be greater than zero while IRR rule states that the project should be accepted if the IRR>Cost of capital)

A project is considered acceptable if its NPV is greater zero.- True (Since positive NPV adds value)

Both the NPV method and the IRR method of evaluating capital investment projects are widely considered to be superior to the payback method- True (Both take into account the time value of money as against payback method)

An NPV of zero signifies that the project's cash flows are just sufficient to repay the invested capital and to provide the required rate of return on that capital.=- True (NPV of zero indicates that discounted cash inflows are equal to discounted cash outflows)

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
Which of the following statements is CORRECT? Assume that the project being considered has normal cash...
Which of the following statements is CORRECT? Assume that the project being considered has normal cash flows, with one outflow followed by a series of inflows. a. The NPVs of relatively risky projects should be found using relatively low costs of capital. b. If a project's NPV is greater than zero, then its IRR must be less than the cost of capital. c. The higher the cost of capital used to calculate the NPV, the lower the calculated NPV will...
Capital Budgeting: 1. T/F If the NPV<0, the WACC > the IRR 2.T/F Salvage value is...
Capital Budgeting: 1. T/F If the NPV<0, the WACC > the IRR 2.T/F Salvage value is added back in to the last years projects cash flows 3. T/F NPV is considered to be the superior method for choosing capital budget projects 4. T/F If projects are mutually exclusive, if one has a higher IRR choose that project over the NPV decision. Cost of Capital 5. T/F external equity (new stock issuance) is less expensive since it will have a flotation...
Which one of the following is TRUE? The NPV decision rule says to accept an investment...
Which one of the following is TRUE? The NPV decision rule says to accept an investment if the NPV is negative. The IRR decision rule states that a project should be accepted if its IRR exceeds the required return. The discount rate that causes the net present value of a project to equal zero is called the market rate. IRR is superior to NPV for choosing between different projects. Payback ignores the project's cost.
Which of the following statements is CORRECT? Assume that the project being considered has normal cash...
Which of the following statements is CORRECT? Assume that the project being considered has normal cash flows, with one outflow followed by a series of inflows. Group of answer choices The lower the cost of capital used to calculate a project's NPV, the lower the calculated NPV will be. If a project's NPV is less than zero, then its IRR must be less than the cost of capital. If a project's NPV is greater than zero, then its IRR must...
Which of the following statements about capital budgeting decision methods is most correct? NPV is superior...
Which of the following statements about capital budgeting decision methods is most correct? NPV is superior since it is the most conceptually correct method. IRR is superior since it measures the rate of return on a capital investment. PI is superior since it measures the present value benefit per dollar of capital invested. PB is superior since it is quick and easy to use and understand. None of the three methods is considered superior to the others.
Tom just got out of a meeting with felicity in which they discussed a capital budgeting...
Tom just got out of a meeting with felicity in which they discussed a capital budgeting project they are evaluating for the company. Tom's mind was not focused on the meeting, so all he can remember is that Felicity used one of the time value of money techniques mentioned in the book to evaluate the project and that she concluded the project should be purchase. based on this information, which of the following statements must be correct? A. The projected...
1) If the NPV of a project with one sign reversal is positive, then its IRR:...
1) If the NPV of a project with one sign reversal is positive, then its IRR: Select one: a. must be greater than the required rate of return b. must be less than the required rate of return c. could be greater or less than the required rate of return d. cannot be determined without actual cash flows 2) Which of the following statements is INCORRECT? Select one: a. An acceptable project should have an NPV greater than or equal...
The Basics of Capital Budgeting: NPV Profile A project's NPV profile graph intersects the Y-axis at...
The Basics of Capital Budgeting: NPV Profile A project's NPV profile graph intersects the Y-axis at 0% cost of capital and intersects the X-axis at the project's -Select-paybackMIRRIRRCorrect 1 of Item 1 (where NPV = 0). The Y-axis intersection point represents the project's undiscounted NPV. The point at which 2 projects' profiles cross one another is the crossover rate. The crossover rate can be found by calculating the -Select-IRRpaybackMIRRCorrect 2 of Item 1 of the differences in the projects' cash...
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.
Choose a wrong statement regarding capital budgeting. ① For a business project with a negative net...
Choose a wrong statement regarding capital budgeting. ① For a business project with a negative net present value (NPV), its internal rate of return (IRR) must be lower than the weighted average cost of capital (WACC) used to evaluate the project. ② Because the NPV and IRR of mutually exclusive projects can give opposite results, entirely depending on the IRR method to choose a business project can minimize the risk of misjudgment. ③ The big difference between the NPV and...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT