O The NPV and IRR methods, when used to evaluate two independent and equally risky projects, will lead to different accept/reject decisions and thus capital budgets if the projects' IRRS are greater than their cost of capital. Conflict will exist between the NPV and IRR methods, when used to evaluate two equally risky but mutually exclusive project if the projects' cost of capital exceeds the rate at which the projects' NPV profiles cross. O None. O An increase in the firm's WACC will decrease projects' NPVs, which could change the accept/reject decision for any potential project. However, such a change would have no impact on projects' IRRs. Therefore, the accept/reject decision under the IRR method is independent of the cost of capital. O The NPV and IRR methods, when used to evaluate two equally risky but mutually exclusive projects, will lead to different accept/reject decisions and thus capital budgets if the cost of capital at which the projects' NPV profiles cross is less than the projects' cost of capital.
O The NPV and IRR methods, when used to evaluate two independent and equally risky projects, will lead to different accept/reject decisions and thus capital budgets if the projects' IRRS are greater than their cost of capital. Conflict will exist between the NPV and IRR methods, when used to evaluate two equally risky but mutually exclusive project if the projects' cost of capital exceeds the rate at which the projects' NPV profiles cross. O None. O An increase in the firm's WACC will decrease projects' NPVs, which could change the accept/reject decision for any potential project. However, such a change would have no impact on projects' IRRs. Therefore, the accept/reject decision under the IRR method is independent of the cost of capital. O The NPV and IRR methods, when used to evaluate two equally risky but mutually exclusive projects, will lead to different accept/reject decisions and thus capital budgets if the cost of capital at which the projects' NPV profiles cross is less than the projects' cost of capital.
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
Problem 1PS
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which of the following statement is correct?
Transcribed Image Text:O The NPV and IRR methods, when used to evaluate two independent and
equally risky projects, will lead to different accept/reject decisions and
thus capital budgets if the projects' IRRS are greater than their cost of
capital.
Conflict will exist between the NPV and IRR methods, when used to
evaluate two equally risky but mutually exclusive project if the projects'
cost of capital exceeds the rate at which the projects' NPV profiles cross.
O None.
O An increase in the firm's WACC will decrease projects' NPVs, which could
change the accept/reject decision for any potential project. However,
such a change would have no impact on projects' IRRs. Therefore, the
accept/reject decision under the IRR method is independent of the cost
of capital.
The NPV and IRR methods. when used to evaluate two equally risky but
mutually exclusive projects, will lead to different accept/reject decisions
and thus capital budgets if the cost of capital at which the projects' NPV
profiles cross is less than the projects' cost of capital.
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