Which of the following statements is correct? A. If the NPV of a project is greater than 0, its PI will equal 0. B. If the IRR of a project is 0%, its NPV, using a discount rate, k, greater than 0, will be 0. C. If the PI of a project is less than 1, its NPV should be less than 0. D. None

Which of the following statements is correct? A. If the NPV of a project is greater than 0, its PI will equal 0. B. If the IRR of a project is 0%, its NPV, using a discount rate, k, greater than 0, will be 0. C. If the PI of a project is less than 1, its NPV should be less than 0. D. None

Managerial Accounting: The Cornerstone of Business Decision-Making

7th Edition

ISBN:9781337115773

Author:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Publisher:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Chapter12: Capital Investment Decisions

Section: Chapter Questions

Problem 16MCQ: Using IRR, a project is rejected if the IRR a. is equal to the required rate of return. b. is less...

See similar textbooks

Related questions

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: Which of the following best represents the relationship between the weighted average cost of capital…

A: WACC is the weighted average cost of capital whereas MARR is minimum acceptable rate of return.

Q: 1. How much is payback period (PP)? Should the project be accepted or rejected? 2. How much is…

A: Capital budgeting is a process used by the companies to use its limited resources to get the best…

Q: which of the following statement is true>? 1. return on equity is the ratio of total assets to…

A: Capital budgeting is a way to evaluate profitability of new projects or investment by using various…

Q: Nine Point Industries is considering a new project that has a higher risk than the overall firm.…

A: Capital budgeting indicates the evaluation of the profitability of possible investments and projects…

Q: Which of the following is CORRECT? Select one: a. If the NPV of a project is negative, the IRR for…

A: NPV is a technique that helps the company to analyze the viability of the project i.e. the company…

Q: f a project's cash flows are discounted at the internal rate of return, the NPV will always be…

A: Internal rate of return is the rate at which present value of cash inflows is equal to present value…

Q: A firm with a WACC of 12% is considering the following projects: Project Beta IRR 10.50% w 0.75 0.90…

A: CAPM model defines a relation between the types of risk namely systematic risk and unsystematic…

Q: What will happen to the internal rate of return (IRR) of a project if the discount rate is decreased…

A: IRR is the rate where the NPV of the project is ZERO

Q: The general rule for using the weighted-average cost of capital (WACC) in capital budgeting…

A: WACC is the Weighted Average Cost of Capital of a company. A company's capital consists of debt and…

Q: If the net present value of a project is zero based on a discount rate of 16%, then the internal…

A: NPV stands for Net present value, which is described as the difference among the present value of…

Q: A project’s IRR is the discount rate that causes the PV of the inflows to equal the project’s cost.…

A: The given statement is true.

Q: There Is no correlation between net present value and Internal rate of return. A project with a…

A: Net present value that is NPV difference between present value of cash flow and initial investment.…

Q: 2. Create a Figure (in Excel or similar) showing the value of the PVNB using different discount…

A: Consider a situation in which the initial cost of the project is $1,000,000 Cash inflow for the next…

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: greater than the discount r als 0, then the projects init

A: Net Present Value ("NPV"), Internal Rate of Return ("IRR") and Profitability Index ("PI") are all…

Q: ould you use the Figure below that shows the net present value profile of two projects Y and W to…

A: Internal rate of return of a project is the discount rate at which the NPV of project is 0. The…

Q: Projects with _____are preferred. O a. Lower payback period. O b. Normal payback period.…

A: The payback period is a concept of capital budgeting whereby the number of periods is given after…

Q: Whenever the present value of the project is greater than the initial cash outlay then both the NPV…

A: Net present value is present value of cash inflows less present value of outflows. PI i.e.…

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: The NPV of a project is negative when the discount rate at 8%, but is positive when the discount…

A: IRR is internal rate of return. Internal rate of return is the discount rate where NPV i.e. net…

Q: Which one of the following statements is correct concerning the payback rule? a. The payback…

A: Answer - Payback Period - The payback period is the amount of time it will take to recover the…

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: internal rate of return (IRR): Group of answer choices will always lead to the same decision as…

A: IRR is a method used for investment appraisal. It is the rate of return at which the present value…

Q: Help question 21

A: Rate of return is a profit of an investment over a specified period of time, expressed as…

Q: Consider the following investment projects: Which of the following is true? a) All projects…

A: Simple projects are projects in which the sign change in net cash flow is only once. Non-simple…

Q: Which of the following is correct?

A: The payback period is the time duration taken to reap back the amount invested in the project. The…

Q: calculates that a project with conventional cash flows and a required return of 14% has a negative…

A: Internal rate of return when net present value is zero that means present value of cash flow is…

Q: Can you have an investment with DCFRR > MARR, but NPV $0 (calculating NPV with iTyM=MARR)? Can you…

A: Since you have asked multiple questions, we will solve the first question for you. Please ask…

Q: You should accept a project when the ?: net present value is negative. profitability index is…

A: Honor code- Since you have asked multiple questions, we will solve only the first question for you.…

Q: Which of the following projects would you feel safest in accepting? Assume the opportunity cost of…

A: NPV: NPV is also called net present value. NPV is the difference between the present value of cash…

Q: A project is economically feasible if: O a. ts future worth is less than zero O b. its annual worth…

A: Future worth is the sum of future value of cash flows. Annual worth is the equivalent annual cash…

Q: Which project below would you consider acceptable? One whose IRR is greater than the MARR One whose…

A: Solution: Internal Rate of Return (IRR) is the rate of return which the project yields ie. the…

Q: Which of the following statements is CORRECT?

A: Net Present Value (NPV) Net Present Value method is a discounting cash flow technique used in…

Q: Choices for last three requirements 3. What is the approximate IRR of Project A? a. 28% b. 18% c.…

A: IRR is the internal rate of return. It is the rate at which NPV (net present value) becomes nil.

Q: A project that was analyzed under the assumption of 3% inflation was found to have a unadjusted…

A: Given, Inflation rate : 3% Unadjusted IRR : 18%

Q: The relationship between NPV and IRR is such that a. both approaches always provide the same ranking…

A: IRR is the required rate of return for the project to have zero Net Present value. Net present…

Q: If the net present value of a proposed investment is negative, what is the discount rate used? Less…

A: Net present value (NPV) is the significant present value difference between cash outflows and cash…

Q: he project is accepted Select one: a. None of the option b. If the profitability index is negative…

A: The profitability index is defined as the profit investment ratio (PIR) or value investment ratio…

Q: For capital budgeting projects like the one depicted in the prior problem, which of the following…

A: The lower the required rate of return, the lower the calculated NPV. When we calculate NPV, we…

Q: O One can use the IRR rule for investment decision making without knowing the discount rate O The…

A: Question 2: The concerned question belongs to Time value of money where different methoda are used…

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

Which of the following statements is correct?

A. If the NPV of a project is greater than 0, its PI will equal 0.

B. If the IRR of a project is 0%, its NPV, using a discount rate, k, greater than 0, will be 0.

C. If the PI of a project is less than 1, its NPV should be less than 0.

D. None

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 General Introduction

VIEW

Step 2 Explanation

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

n 0 1 2 3 4 5 6 7 8 9 10 A -$250 $60 $970 B -$200 $90 $90 $60 $60 Net Cashflow с -$70 $20 $10 $5 -$50 $60 $50 $40 $30 $20 $10 D -$300 $270 $250 -$129 -$20 $120 $40 E -$90 -$100 -$50 $0 $150 $150 $100 $100
State the decision criteria for each of the following. (2) PI > MIRR > NPV > IRR > options; 0 1 PI MIRR NPV IRR Payback
What would you recommend if the benefit / cost ratio is >1: Select one: a. The project must be accepted. b. Benefit / cost ratio cannot be >1 c. The project must be rejected. d. Benefit / cost ratio always =1
What would you recommend if the benefit / cost ratio is >1: Select one: a. Benefit/cost ratio always =1 b. The project must be rejected. c. Benefit / cost ratio cannot be >1 d. The project must be accepted
Which one of the following statements is correct?a. If NPV is positive, IRR will be less than required rate of returnb. If NPV = 0, IRR is equal to the required rate of returnc. If NPV is positive, IRR is equal to the required rate of returnd. If NPV is negative, IRR will be greater than the required rate of returne. None of the above
b) Using data provided below, compute appropriate values and fill the table below to help identify the least risky and most risky project among alternatives A, B and C using appropriate criteria. Project EV D D2 Var St. dev Coef.0f Var TT 12 0.2 A 18 0.7 28 0.1 10 0.3 В 22 0.6 32 0.1 11 0.1 C 21 0.8 31 0.1 Where n denotes the profit, P is the probability, EV stand for Expected value, D is the Deviation, D$ denote the deviation square, St. dev is the standard deviation and finally Coef.of Var is the coefficient of variation.
Which project below would you consider acceptable? One whose IRR is greater than the MARR One whose MARR is greater than the IRR O One whose RIC is less than the MARR One whose MARR is greater than the MIRR
Which of the following is true? Discounted Payback Period is by definition longer than the Non-Discounted Payback Period as long as the discount rate is greater than zero. A project has a positive NPV if its Profitability Index is less than 1. a and b None of the above
Which of the following statement is correct Select one: a. A project is accepted when profitability index will be greater than one b. All statements are correct c. A project is accepted when net present value is greater than zero d. A project is accepted when payback period is less than the other project
which of the following statement is true>? 1. return on equity is the ratio of total assets to total net income 2. one must know the discount rate to compute the npv of a project but one can compute the IRR without referring to the discount rate. 3. there will always be one IRR regardless of cash flows 4. one must know the discount rate to compute the IRR of a project but one can compute the NPV without referring to the discount rate 5. payback accounts for time value of money
Think about whether a risk-free asset should earn a risk-premium beyond the risk-free rate. Thinking about that should give you an idea of the beta for a risk-free asset. Or, look again at the CAPM equation: E(Ri)=Rf+βi[E(RM)−Rf] Given this equation, what beta sets the E(R) of the risk free asset equal to the risk-free rate? A) zero B) 0.5 C) 1.0 D) its random
Consider the following sets of investment projects: (a) Classify each project as either simple or nonsimple.(b) Compute the i* for Project A, using the quadratic equation.(c) Obtain the rate(s) of return for each project by plotting the PW as a function of interest rate.