True or False If several independent projects are considered, the one(s) with the highest PIs should be chosen If two mutually exclusive projects are under consideration and using the PI for analyzing the projects, then only the one with the higher PI should be selected.

True or False If several independent projects are considered, the one(s) with the highest PIs should be chosen If two mutually exclusive projects are under consideration and using the PI for analyzing the projects, then only the one with the higher PI should be selected.

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter12: Capital Budgeting: Decision Criteria

Section: Chapter Questions

Problem 4Q

See similar textbooks

Related questions

Q: c) d) Which project(s) would you select if you used the IRR methods. Why? If these were mutually…

A: Answer C: Project B should be selected as it has a higher IRR.

Q: a. Calculate the projects’ NPVs, IRRs, MIRRs, regular paybacks, and discounted paybacks. b. If the…

A: Note : As per the bartelby guidelines only first two parts will be answered. Given information :

Q: stems from the B/C ra

A: Under long life span projects will use B/C ratio. Here benefits and cost of the projects will be…

Q: a. Calculate NPV for each project. Do not round intermediate calculations. Round your answers to the…

A: Net Present Value: It represents the present worth of the project in absolute profitability. It is…

Q: Answer this question as it is pertaining to two MUTUALLY EXCLUSIVE projects on the following figure.…

A: From the given graph of NPV vs required rate, we can see that at the required rate of 8% both A and…

Q: Calculate payback for each project. Do not round intermediate calculations. Round your answers to…

A: According to the requirement of the question, question 4 and 5 given in the image and the ones…

Q: Suppose Tapley Inc. uses a WACC of 8% for below-average risk projects, 10% for average-risk…

A: IRR (Internal Rate of Return) is the interest rate where net present value (NPV) of a project equals…

Q: Answer this question as it is pertaining to two MUTUALLY EXCLUSIVE projects on the following figure.…

A: IRR internal rate of return is where net present value is zero.

Q: What is the NPV decision rule for discretionary mutually exclusive projects? A. Accept the project…

A: There are two types of projects: Independent projects. Mutually exclusive projects. Independent…

Q: When faced with a set of independent projects, one should select (choose the best answer) O all…

A: NPV: Net present value is a method to find out a project or investments current value by…

Q: When faced with a set of independent projects, one should select (choose the best answer) Group of…

A: There really are two categories of capital investment projects: independent projects which do not…

Q: The overall rate of return needs to be checked for multiple mutually exclusive projects when only…

A: When decision has to be made while comparing one project with other projects and out of which only…

Q: When evaluating projects by the present worth method, how do you know which one(s) to select if the…

Q: Many times, project decision makers do not rely solely on financialhurdles, such as return on…

A: Intangible factors are those factors which can not be seen touched or felt. These factors are really…

Q: pted when profitability index will be greater than one b. All statements are corre

A: Profitability index indicates present value of cash inflows as no. of times of present value of cash…

Q: The board of directors of AMSB are confused between IRR and NPV. Briefly discuss the Internal Rate…

A: The internal rate of return method is a capital budgeting method which helps in finding out the rate…

Q: In dealing with IRR and NPV project evaluations, there is something called a crossover rate. What is…

A: The question is related to crossover rate of return i.e cost of capital at which the Net Present…

Q: The government is contemplating between two projects , A and B . Suppose project A has a positive…

A: A benefit–cost ratio is a cost–benefit analysis measure that seeks to summarize a project net value…

Q: When faced with a set of independent projects, one should select (choose the best answer) O all…

A: When accepting individual projects, Project with Positive NPV or IRR greater than hurdle rate or…

Q: f the projects are mutually exclusive, highest payback period project will accept normally. a. True…

A: Payback period is the time it takes to recover the cost of an investment

Q: If both the projects have recorded a positive NPV value and the projects are mutually exclusive,…

A: NPV indicate actual dollar amount of benefit added by the project. It can be calculated NPV =present…

Q: Under what conditions might you find more thanone IRR for a project? How would you decidewhether or…

A: Net present value (NPV) is the contrast between the present value of money inflows over some…

Q: a. Calculate the expected NPV for both projects. Can the question be resolved with this information…

A: Expected NPV: It is the weighted average of all NPVs. It is resulted when the weighted values are…

Q: What is crossover rate and why is it important when evaluating two projects?

A: The process through which a company evaluates possible big projects or investments is called capital…

Q: Project A and Project B are mutually exclusive projects, which one of the following is incorrect…

A: Mutually exclusive projects are those projects which compete each other for capital and resources.

Q: Is it possible for conflicts to exist between the NPV and the IRR when independent projects are…

A: Meaning of NPV= Net present Value NPV is used to analyse the decisions of investments in any project…

Q: Explain why NPV is generally preferred over IRR when choosing among competing or mutually exclusive…

A: When using the net present value method of selecting from various investment projects: the cash…

Q: When two mutually exclusive projects are being compared, explain whythe short-term project might be…

A: Mutually exclusive projects are the projects with same purpose. Hence, a company chooses only one…

Q: If three investment alternatives all have some degree of risk and different expected returns, which…

A: If three investment alternatives all have some degree of risk and different expected returns. The…

Q: Which of the following is not a criterion that is used to determine whether a project is acceptable…

A: A project is accepted when NPV is greater than or equal to zero. If NPV is Negative then the project…

Q: Please explain the answer thoroughly and support it with an example. True or False: In…

A: Profitability Index and Internal rate of return (IRR) are the two methods which are used for…

Q: Even when NPV and IRR give the same accept/reject decisions, they may not give the same…

A: Answer: The correct answer is TRUE.

Q: The project with the highest IRR may not be the preferred alternative. To illustrate the flaws of…

A: Internal Rate of Return (IRR) is that discounting rate at which Net Present Value of the project is…

Q: When faced with a set of independent projects, one should select (choose the best answer) O all…

A: When there are set of projects, selection of a project will be based on any of the following options…

Q: In mutually exclusive projects, a firm will evaluate all alternatives and select the best project…

A: The mutually exclusive projects are those selection of one project excludes the selection of another…

Q: What is Project A's NPV? Do not round intermediate calculations. Round your answer to the nearest…

A: Net Present Value: It is the present worth of the project's cash flow. It is calculated by reducing…

Q: When evaluating mutually exclusive projects with different lives and different levels of risk, which…

A: Please find the answer to the above question below:

Q: Consider IRR for a Nonsimple Project: Mixed Investment?

A: Answer: Mixed investment is an investment during the investment period in which a company borrows…

Q: A project is not economically feasible if MARR is at least bigger than or equal to IRR. Select one:…

A: The Above Statement is 'True'

Q: When faced with a set of independent projects, one should select (choose the best answer) all…

A: Positive NPV occurs only when the present value of all inflows is greater than the present value of…

Q: Explain why the IRR may contradict the ranking of NPV and therfore not recmmeneded to use when…

A: For single and Individual projects with conventional cash flows, there is no conflicts or…

Q: 5. Which one below is true about IRR analysis when comparing 2 mutually exclusive alternatives? A.…

Q: Which of the following were listed as potential Problems or Issues associated with Using a Rate of…

A: Correct issues of ROR Approach- (2, 3, and 5)

Q: .When using the NPV method the decision making rationale includes the following (select all that…

A: NPV : it the difference between PV of cash inflows and PV of cash outflows.

Q: How do you apply the Net Present Value rule when multiple projects are available and you have the…

A: If the NPV is positive, the project should be accepted. If the NPV is negative the project should be…

Q: Describe one advantage and one disadvantage of the NPV methodology of evaluating proposed projects

A: The net present value of the NPV technique is that it considers the essential thought that a future…

Concept explainers

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.

Question

True or False

If several independent projects are considered, the one(s) with the highest PIs should be chosen

If two mutually exclusive projects are under consideration and using the PI for analyzing the projects, then only the one with the higher PI should be selected.

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

This is a popular solution!

SEE SOLUTION Check out a sample Q&A here

Step 1

VIEW

Step 2

VIEW

Trending now

This is a popular solution!

Step by step

Solved in 2 steps

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.

Similar questions

When faced with a set of independent projects, one should select (choose the best answer) O all projects with a positive NPV or an IRR greater than the hurdle rate. O all projects with an IRR greater than the hurdle rate O all projects with a positive NPV O all projects with a positive NPV or an IRR greater than the hurdle rate or a PI greater than one. O all projects with a positive NPV or a PI greater than the one. O all projects with a Pl greater than one. O all projects with an IRR greater than the hurdle rate or a Pl greater than one.
When faced with a set of independent projects, one should select (choose the best answer) A. all projects with a positive NPV or an IRR greater than the hurdle rate or a PI greater than one. B. all projects with a PI greater than one. C. all projects with an IRR greater than the hurdle rate D. all projects with a positive NPV or an IRR greater than the hurdle rate. E. all projects with a positive NPV or a PI greater than the one. F. all projects with a positive NPV G. all projects with an IRR greater than the hurdle rate or a Pl greater than one.
When faced with a set of independent projects, one should select (choose the best answer) a. all projects with a positive NPV or an IRR greater than the hurdle rate or a PI greater than one. b. all projects with a positive NPV or an IRR greater than the hurdle rate. c. all projects with an IRR greater than the hurdle rate d. all projects with an IRR greater than the hurdle rate or a PI greater than one. e. all projects with a positive NPV f. all projects with a positive NPV or a PI greater than the one. g. all projects with a PI greater than one.
When faced with a set of independent projects, one should select (choose the best answer) Group of answer choices all projects with an IRR greater than the hurdle rate all projects with a positive NPV or a PI greater than the one. all projects with a positive NPV or an IRR greater than the hurdle rate. all projects with an IRR greater than the hurdle rate or a PI greater than one. all projects with a positive NPV or an IRR greater than the hurdle rate or a PI greater than one. all projects with a PI greater than one. all projects with a positive NPV
29....When using the NPV method the decision making rationale includes the following (select all that apply): a.If projects are mutually exclusive, accept the project with the highest positive NPV. b.If projects are independent, accept if the project NPV<0. c.If projects are independent, accept if the project NPV>0 d.If the projects are mutually exclusive, accept the project with lowest NPV.
Calculate the NPVs of both Project X and Project Y. Show the NPVs for each project. If the Projects are Independent which would you approve? If the Projects are Mutually Exclusive which would you approve?
a. Explain why the IRR may contradict the ranking of NPV and therfore not recmmeneded to use when choosing among mutually exclusive projects.\ (5 lines) b. Give two possible examples of such projects. (choose realistic projects, or actual projects you know of) Exaplain your choice?
Explain how the NPV is used to determine whether a project should be accepted or rejected.
The following information on two mutually exclusive projects is given below: Which of the following statements is correct?(a) Since the two projects have the same rate of return, they are indifferent.(b) Project A would be a better choice because the required investment is smaller with the same rate of return.(c) Project B would be a better choice as long as the investor's MARR is lessthan 25%.(d) Project Bis a better choice regardless of the investor's MARR.
Describe one advantage and one disadvantage of the NPV methodology of evaluating proposed projects
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
Why is there conflict between the NPV and IRR criteria between projects Y and Z? Which is typically considered the best decision criteria to use and why?