Discuss the following statement: If a firm has only independent projects, a constant WACC,and projects with normal cash flows, the NPV and IRR methods will always lead to identicalcapital budgeting decisions. What does this imply about the choice between IRR and NPV?If each of the assumptions were changed (one by one), how would your answer change?
Discuss the following statement: If a firm has only independent projects, a constant WACC,and projects with normal cash flows, the NPV and IRR methods will always lead to identicalcapital budgeting decisions. What does this imply about the choice between IRR and NPV?If each of the assumptions were changed (one by one), how would your answer change?
Chapter11: Capital Budgeting And Risk
Section: Chapter Questions
Problem 3QTD
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Discuss the following statement: If a firm has only independent projects, a constant WACC,
and projects with normal cash flows, the
capital budgeting decisions. What does this imply about the choice between IRR and NPV?
If each of the assumptions were changed (one by one), how would your answer change?
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