Mutually exclusive projects are best defined as competing projects that: have the same initial start-up costs. both require the total use of the same limited resource. would need to commence on the same day. both have negative cash outflows at time zero. have the same life span.

Mutually exclusive projects are best defined as competing projects that: have the same initial start-up costs. both require the total use of the same limited resource. would need to commence on the same day. both have negative cash outflows at time zero. have the same life span.

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Description: Mutually exclusive projects are best defined as competing projects that:have the same initial start-up costs.both require the total use of the same limited resource.would need to commence on the same day.both have negative cash outflows at time zero

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

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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.
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.
The IRR of normal Project X is greater than the IRR of normal Project Y, and both IRRS are greater than zero. Also, the NPV of X is greater than the NPV of Y at the cost of capital. If the two projects are mutually exclusive, Project X should definitely be selected, and the investment made, provided we have confidence in the data. Put another way, it is impossible to draw NPV profiles that would suggest not accepting Project X. Group of answer choices True False
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.
Which of the following is CORRECT? Select one: a. If the NPV of a project is negative, the IRR for the project must also be negative. b. A project's MIRR can never exceed its IRR. c. If a project with normal cash flows has an IRR less than WACC, the project must have a positive NPV. d. If Project 1's IRR exceeds Project 2's IRR, then 1 must have a higher NPV than 2. e. If a project with normal cash flows has an IRR greater than WACC, the project must have a positive NPV. You purchase a house for $250,000. After you make your down payment of $50,000, you are financing $200,000 for 30 years at an annual percentage rate of 5.4%. How much are your monthly payments? Select one: a. Less than $1,000 b. Between $1,000 and $1,050 c. Between $1,050 and $1,100 d. Between $1,100 and $1,150 e. Greater than $1,200
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.
There are two distinct discount rates at which a particular project will have a zero net present value. In this situation, the project is said to: О О create a mutually exclusive investment decision produce multiple economies of scale have multiple internal rates of return have two net present value profiles
Which of the following is correct? • the shorter a projects payback period, the less desirable the project is normally considered to be by this criterion • one drawback of the payback criterion is that this method does not take account of cash flows beyond the payback period. • if a projects payback is postitive, then the project should be accepted because it must have a positive NPV • the regular payback ignores cash flows beyond the payback period, but the discounted payback method overcomes this problem •one drawback of the discounted payback is that this method does not consider the time value of money, while the regular payback overcomes this drawback.
Which of the following would cause a project to have a lower net present value, thereby making the project less appealing? A. The discount rate increases B. The cash flows are extended over a longer period of time. C. The investment cost decreases without affecting the expected income and life of the project. d. The cash flows are accelerated and the project life is correspondingly shortened.
The blue curve (labeled "L") depicts the NPV for a project with larger cash flows later of -$1,000, $100, $300, $400, and $675. The red curve (labeled "S") depicts the NPV for a project with larger cash flows sooner of -$1,000, $500, $400, $300, and $100. Drag on the graph either left or right to change the cost of capital interest rate at which the NPV is evaluated for the two projects. NPV ($) 500- 400 300 200- 100.40100- 78.82 0 -100- Project S: NPV = CF₁+N CF₁ -=1 (1+r) N CF₂ Project L: NPV = CF₁ + Σ = 1 (1+r) ² + ΣΜ = = -S1, 000 + ² L ¡=-$1,000+ S 15 $500 $400 $300 $100 (1+0.1000)¹ (1+0.1000)² (1+0.1000)³ (1+0.1000)* 20 + Cost of Capital (%) $100 $300 $400 $675 (1+0.1000)¹ (1+0.1000) (1+0.1000)³ (1+0.1000)* + + + + + = $78.82 = $100.40
As the project is able to cover the cost in less than the life of the project and all other parameters are profitable. One should Accept the Project. What is the meaning of "less than the life of the project and all other parameters are profitable".?
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.