A situation in which taking one investment prevents the taking of another is(are) called:O Net present value profiling.Operational ambiguity.Mutually exclusive projects.O Issues of scale.O Multiple rates of return.

In capital budgeting decisions, there are three types investment decision of projects (a) dependent…

Answered: A situation in which taking one…

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter10: Capital Budgeting: Decision Criteria And Real Option

Section: Chapter Questions

Problem 2QTD

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Using IRR, a project is rejected if the IRR a. is equal to the required rate of return. b. is less than the required rate of return. c. is greater than the cost of capital. d. is greater than the required rate of return. e. produces an NPV equal to zero.
Using NPV, a project is rejected if it is a. equal to zero. b. negative. c. positive. d. equal to the required rate of return. e. greater than the cost of capital.
Which of the following is a disadvantage of the internal rate of return criterion? Select one: a. It is not a true rate of return. b. It uses an arbitrary benchmark cutoff rate. c. It ignores time value of money, cash flows, and market values. d. It cannot be used to rank independent projects. e. It may lead to incorrect decisions when comparing mutually exclusive investments.
An investment should be rejected if the IRR is Group of answer choices - equal to the required rate of return - greater than the accounting rate of return - less than the required rate of return - greater than the required rate of return
When different investment rules give conflicting answers, then decisions should be based on the Net Present Value rule, as it is the most reliable and accurate decision rule True False
Which of the following is an advantage of Net present value? a. Investment potential ignored b. Useful in evaluating mutually exclusive projects c. Considers time value of money d. Easy to calculate
I asked this question before, but for some reason, even though it was answred I cannot see it, it marks an error when I try to open it. So here it is again: Comparing Investment Criteria. Define each of the following investment rules and discuss any potential shortcomings of each. In your definition, state the criterion for accepting or rejecting independent projects under each rule. a. Payback period. b. Internal rate of return. c. Profitability index. d. Net present value. Thank you!
Internal Rate of Return is used: a) To determine the interest rate at which benefits of a project are equivalent to its costs. b) To determine which investment to choose when one of two alternatives must be chosen. c) To determine the interest rate for an investment that yields no income. d) To choose an investment that necessary to preserve the operation of the business. e) To justify a “lost-leader” project of a strategic nature.
What is the NPV decision rule for discretionary mutually exclusive projects? A. Accept the project with the highest NPV, even if the NPV is negative. B. If there is sufficient capital, accept all positive-NPV projects. C. Accept the project with the highest IRR. D. Accept the project with the highest NPV, as long as the NPV is 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…
“If the initial cost of an investment project is not totally sunk (the project is not totally irreversible), one should not consider real options” True or False? Write a short answer that offers a discussion about the statement.
Comparing Investment Decision Criterion. Define each of the following investment rules and discuss any potential shortcomings of each. In your definition, state the criteria for accepting or rejecting independent and mutually exclusive projects under each rule. Payback period Modified Internal rate of return Internal rate of return Profitability index Net present value

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A situation in which taking one investment prevents the taking of another is(are) called: O Net present value profiling. O Operational ambiguity. O Mutually exclusive projects. Issues of scale. Multiple rates of return.