Essentials Of Investments
11th Edition
ISBN: 9781260013924
Author: Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher: Mcgraw-hill Education,
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Under Net present value criterion, a project is approved if
Select one:
a. If present value is zero
b. None of the option
c. Its net present value is positive
d. If present value of cash outflow is higher than inflow
e. Its net present value is negative
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- 3. In a comparison of the NPV and IRR techniques, which of the following is true? statements A. Both methods give the same accept or reject decision, regardless of the pattern of the cash flows. B. IRR is technically superior to NPV and easier to calculate. C. The NPV approach is superior if discount rates are expected to vary over the life of the project. D. NPV and accounting ROCE can be confused.arrow_forwardWhich of the following statements is true? O The salvage value of new equipment should not be considered when using the internal rate of return method to evaluate a project. O The internal rate of return method assumes that the cash flows generated by a project are reinvested at a rate of return that equals the company's cost of capital. O The profitability index and the internal rate of return will always result in the same preference ranking for investment projects. O In calculating the profitability index, the initial investment in the project should be reduced by any proceeds from the sale of old equipment. O None of the above statements is true.arrow_forwardA 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.arrow_forward
- Nonearrow_forwardWhich of the following statements is CORRECT? Assume that the project being considered has normal cash flows, with one outflow followed by a series of inflows. O A project's regular IRR is found by compounding the initial cost at the WACC to find the terminal value (TV), then discounting the TV at the WACC. A project's IRR is the discount rate that causes the PV of the inflows to equal the project's cost. O If a project's IRR is smaller than the WACC, then its NPV will be positive. O A project's regular IRR is found by compounding the cash inflows at the WACC to find the present value (PV), then discounting the TV to find the IRR.arrow_forwardWhich 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.arrow_forward
- 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 abovearrow_forwardWhat is the Modified Internal Rate of Return (MIRR) Select one: The opposite of NPV A reinvestment rate to account for positive cash flows reinvested into a project An approach to discounting The finance rate of a projectarrow_forwardPLEASE ANSWER ASAP.....arrow_forward
- Scenario analysis is defined as the: Multiple Choice determination of the initial cash outlay required to implement a project. determination of changes in NPV estimates when what-if questions are posed. isolation of the effect that a single variable has on the NPV of a project. separation of a project's sunk costs from its opportunity costs. analysis of the effects that a project's terminal cash flows has on the project's NPV.arrow_forwardWhich of the following statements is CORRECT? Assume that all projects being considered have normal cash flows and are equally risky. O If a project's IRR is equal to its WACC, then under all reasonable conditions, the project's IRR must be negative. O If a project's IRR is equal to its WACC, then under all reasonable conditions the project's NPV must be zero. O There is no necessary relationship between a project's IRR, its WACC, and its NPV. O When evaluating mutually exclusive projects, those projects with relatively long lives will tend to have relatively high NPVS when the cost of capital is relatively high. O If a project's IRR is equal to its WACC, then, under all reasonable conditions, the project's NPV must be negative.arrow_forwardWhich of the following statements is CORRECT? Assume that the project being considered has normal cash flows, with one outflow followed by a series of inflows. The lower the WACC used to calculate a project's NPV, the lower the calculated NPV will be. If a project's NPV is less than zero, then its IRR must be less than the WACC. If a project's NPV is greater than zero, then its IRR must be less than zero. The NPV of a relatively low-risk project should be found using a relatively high WACC. A project's NPV is found by compounding the cash inflows at the IRR to find the terminal value (TV), then discounting the TV at the WACC. 000oarrow_forward
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