22 - Which of the following statements is false concerning IRR?IRR of a specific project would be the same for all firms regardless of their cost of capitalIRR is expressed in percentagea)b)c)IRR depends on timing of cash flowsA project is acceptable as long as its IRR is greater than its cost of capitalIRR may be not acceptable even if the NPV is positive for a projectBoş bırakd)e)

Internal Rate of return(IRR) refers to the capital budgeting techniques which are being used to…

22 - Which of the following statements is false concerning IRR? IRR of a specific project would be the same for all firms regardless of their cost of capital IRR is expressed in percentage b) c) IRR depends on timing of cash flows A project is acceptable as long as its IRR is greater than its cost of capital IRR may be not acceptable even if the NPV is positive for a project d) e) Boş bırak

22 - Which of the following statements is false concerning IRR? IRR of a specific project would be the same for all firms regardless of their cost of capital IRR is expressed in percentage b) c) IRR depends on timing of cash flows A project is acceptable as long as its IRR is greater than its cost of capital IRR may be not acceptable even if the NPV is positive for a project d) e) Boş bırak

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter13: Capital Budgeting: Estimating Cash Flows And Analyzing Risk

Section: Chapter Questions

Problem 13MC

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29. Which one of the following statements is correct regarding capital Investment appraisal methods?a) The Payback period takes into account all the cash flows accruing to the projectb) The Net Present value method does not take the time value of money into accountc) The Accounting Rate of Return takes the time value of cash flows into consideration and is the one most often used in practice by business organisationsd) The Internal Rate of Return is the discount rate at which the net present value is zero
16. Which of the following statements regarding the net present value rule and the rate of return rule is false? A. Accept a project if NPV > cost of investment.B. Accept a project if NPV is positive.C. Accept a project if return on investment exceeds the rate of return on an equivalent-risk investment in the financial market.D. Reject a project if NPV is negative.
1) 43- Current Design Co. is considering two mutually exclusive, equally risky, and not repeatable projects, S and L. Their cash flows are shown below. The CEO believes the IRR is the best selection criterion, while the CFO advocates the NPV. If the decision is made by choosing the project with the higher IRR rather than the one with the higher NPV, how much, if any, value will be forgone, i.e., what's the chosen NPV versus the maximum possible NPV? Note that (1) "true value" is measured by NPV, and (2) under some conditions the choice of IRR vs. NPV will have no effect on the value gained or lost. r: 7.50% Year 0 1 2 3 4 CFS −$1,100 $550 $600 $100 $100 CFL −$2,700 $650 $725 $800 $1,400 a. $182.52 b. $171.42 c. $160.31 d. $149.21 e. $138.10 2) 44- Buchholz Corporation follows a moderate current asset investment policy, but it is now considering a change, perhaps to a restricted or maybe to…
28- Which one of the following indicates that a project is expected to NOT createvalue for its owners? a. Positive average accounting rate of returnb. Profitability Index greater than 10c. Internal rate of return that is smaller than the required rate of returnd. Positive net present valuee. Payback period shorter than the requirement
Which of the following statements is false? The equivalent annual value of a project is equal to the net present value of a project held in perpetuity, divided by the required rate of return. None of the given options is false. Management may select a project with a lower net present value because qualitative factors may render the other project less attractive. The rejection of positive net present value projects by management is inconsistent with the objective of maximising shareholder wealth.
8. Which of the following statements is CORRECT? Group of answer choices If two projects are mutually exclusive, then they are likely to have multiple IRRs. For a project to have more than one IRR, then both IRRs must be greater than the WACC. If a project is independent, then it cannot have multiple IRRs. Multiple IRRs can only occur if the signs of the cash flows change more than once. If a project has two IRRs, then the smaller one is the one that is most relevant, and it should be accepted and relied upon.
16. The company cost of capital may be an inappropriate discount rate for a capital budgeting proposal if: A) it calculates a negative NPV for the proposal. B) the proposal has a different degree of risk. C) the company has unique risk. D) the company expects to earn more than the risk-free rate.
45. Which of the following statements is CORRECT? a. The definition of "normal" cash flows is that the cash flow stream has one or more negative cash flows followed by a stream of positive cash flows and then one negative cash flow at the end of the project's life. b. If a project has "normal" cash flows, then it will have exactly two real IRRs. c. If a project has "normal" cash flows, then it can have only one real IRR, whereas a project with "nonnormal" cash flows might have more than one real IRR. d. If a project has "normal" cash flows, then its IRR must be positive. e. If a project has "normal" cash flows, then its MIRR must be positive.
You should accept a project when the ?: net present value is negative. profitability index is positive. payback period exceeds the required period. AAR is greater than the required return. 7. Which one of the following statements is correct? The payback period is also referred to as the benefit-cost ratio. The internal rate of return can be reliably used for all independent projects. The profitability index is used when the investment funds are limited. The net present value should not be used to rank mutually exclusive projects. 8. You should accept a project when the ?: net present value is negative. profitability index is less than 1 but greater than 0. discounted payback period is less than the required period. AAR is less than the required return. 9. The crossover point ? : is used to determine which one of two internal rates of return for a project should be used when determining if a project should be accepted. 2. is the…
25...The Modified IRR method is a. Exactly the same as the IRR. b. A better measure than the NPV. c. The discount rate that causes the present value of a project's terminal value to equal the present value of the costs. The terminal value is found by compounding the cash inflows at the Weighted Average Cost of Capital. Cash flows are reinvested at the Weighted Average Cost of Capital. d. A less realistic measure than the standard IRR.