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A project has an initial cash outflow followed by three annual positive cash inflows and has a payback period of two years. What is the validity of the following statements? (1) The project always has a unique Internal Rate of Return (IRR) (2) If the Internal Rate of Return (IRR) is less than the cost of capital then the project has a positive Net Present Value (NPV) at the cost of capital                 Statement (1)                     Statement (2)             True                                   True             True                                   False             False                                 True      4.              False                                 False

A project has an initial cash outflow followed by three annual positive cash inflows and has a payback period of two years. What is the validity of the following statements? (1) The project always has a unique Internal Rate of Return (IRR) (2) If the Internal Rate of Return (IRR) is less than the cost of capital then the project has a positive Net Present Value (NPV) at the cost of capital                 Statement (1)                     Statement (2)             True                                   True             True                                   False             False                                 True      4.              False                                 False

Essentials Of Investments
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
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  1. A project has an initial cash outflow followed by three annual positive cash inflows and has a payback period of two years.

What is the validity of the following statements?

(1) The project always has a unique Internal Rate of Return (IRR)

(2) If the Internal Rate of Return (IRR) is less than the cost of capital then the project has a positive Net Present Value (NPV) at the cost of capital

                Statement (1)                     Statement (2)

  1.             True                                   True
  2.             True                                   False
  3.             False                                 True

     4.              False                                 False

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