If a net present value analysis for a normal project gives an NPV greater than zero, an internal rate of return calculation on the same project would yield an internal rate of return ____ the firm's cost of capital. a. greater than b. less than c. equal to d. cannot be determined from the information given

If a net present value analysis for a normal project gives an NPV greater than zero, an internal rate of return calculation on the same project would yield an internal rate of return ____ the firm's cost of capital. a. greater than b. less than c. equal to d. cannot be determined from the information given

Managerial Accounting: The Cornerstone of Business Decision-Making

7th Edition

ISBN:9781337115773

Author:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Publisher:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Chapter12: Capital Investment Decisions

Section: Chapter Questions

Problem 16MCQ: Using IRR, a project is rejected if the IRR a. is equal to the required rate of return. b. is less...

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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.
Consider the relationship between a project’s net present value (NPV), its internal rate of return (IRR), and a company’s cost of capital. For each scenario that follows, indicate the relative value of the unknown. If cost of capital is unknown, indicate whether it would be higher or lower than the stated IRR. If NPV is unknown, indicate whether it would be higher or lower than zero. Project 1 is shown as an example.
The relationship between NPV and IRR is such thata. both approaches always provide the same ranking of alternative investment projects.b. the IRR of a project is equal to the firm's cost of capital if the NPV of a project is $0.c. if the NPV of a project is negative, the IRR must be greater than the cost of capital.d. none of the above
Which of the following statements is CORRECT? a. If a project with normal cash flows has an IRR greater than the cost of capital, the project must also have a positive NPV. b. If a project with normal cash flows has an IRR less than the cost of capital, the project must have a positive NPV. c. If the NPV is negative, the IRR must also be negative. d. A project's MIRR can never exceed its IRR. e. If Project A's IRR exceeds Project B's, then A must have the higher NPV.
The firm should accept a project if: the profitability index is greater than or equal to 1. the payback period is less than the life of the investment. the internal rate of return is positive. the internal rate of return is greater than the accounting rate of return.
If the net present value (NPV) of a project is negative: Group of answer choices accepting the project will decrease the value of the firm. the project is acceptable. the project's discounted payback period is shorter than the useful life of the project. the internal rate of return is high than the firm's required rate of return.
a. If NPV is negative, company usually rejects the project. While, if ARR is greater than cost of capital, company accept the project. Last, if Profitability index is greater than 1, accept the project.b. If IRR on investment is zero, its annual cash flows is equal to its required investment. A• FF B• TT C• TF D• FT
For a capital investment project to be acceptable, it must generate a rate of return: O Less than the required rate of return. O Equal to or greater than the cost of capital. 4 O Equal to the initial investment. none of the above answers are correct.
For a capital investment project to be acceptable, it must generate a rate of return A) Less than the required rate of returnB) Equal to or greater than the cost of capitalC) equal to the initial investmentD) none of the above
Which of the following statements is (are) true about project appraisal methods: (i) NPV is the best measure for project appraisal even when capital is rationed. (ii) IRR measures percentage returns of an investment rather than added value. (iii) Contrary to real options, NPV assumes a now or never decision to invest.
Which of the following statements is true about the internal rate of return? a. It is the interest rate that sets a project's net present value at zero. b. It is the minimal acceptable interest rate on an investment. c. It is the difference between the present value of the cash inflows and outflows associated with a project. d. It is the difference between the present value of a cash outflow and the depreciation associated with an asset.