If we compare two mutually exclusive projects using __________ problems can arise if the projects' cash flows exhibit differences in ___________.

If we compare two mutually exclusive projects using problems can arise if the projects' cash flows exhibit differences in _.

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter5: The Time Value Of Money

Section: Chapter Questions

Problem 17QTD

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Production Budget

A budget can be defined as a financial plan designed by an undertaking for a definite period in the future that can contribute towards enhancing the financial success of the business undertaking. It is used to estimate the revenue and expenses. The budget generally takes into account both current and future income and expenses.

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What is the difference between independent projects and dependent projects? a: Independent projects' cash flows are not affected by other projects' cash flows b: Dependent project cash flows are affected by others projects' cash flows c: Both of the above are true d: neither of the above is true
Is it always necessary to adjust projects’ cash flows when different projects haveunequal lives? Explain.
When evaluating capital projects, the decisions using the NPV method and the IRR method will disagree if: Group of answer choices the cash flow pattern is conventional. the projects are mutually exclusive. the cash flow pattern is unconventional and the projects are mutually exclusive. the projects are independent.
Which of the following cash flows should not be considered when evaluating a project? Changes in working capital Shipping and installation costs Sunk costs Opportunity costs Externalities
Which of the following statements is correct regarding the payback method? Takes account of differences in size among projects. If a project’s payback is positive, then the project should be accepted because it must have a zero NPV. Ignores cash flows beyond the payback period. Has an objective, market-determined benchmark for making decisions. Directly account for the time value of money.
What are the best functions to use when evaluating projects with uneven cashflows?
The internal rate of return (IRR) is defined as which of the following: A) IRR may produce multiple rates of return when cash flows are non-conventional.B) IRR is best used for comparing mutually exclusive projects.C) IRR is almost not used in the business world anymoreD) IRR is mainly used to evaluate small projects.
When two mutually exclusive projects are being compared, explain whythe short-term project might be ranked higher under the NPV criterion ifthe cost of capital is high, whereas the long-term project might be deemedbetter if the cost of capital is low. Would changes in the cost of capital evercause a change in the IRR ranking of two such projects? Why or why not?
Which of the following projects have conventional cash-flow streams? Select all that are conventional. A) Project A B) Project B C) Project C D) Project D
Discuss the principal limitations of the cash payback method for evaluating capital investment proposals.