Projects A and B are independent. Project A has an IRR of 14.1% and Project B has an IRR of 12.5%. The crossover rate for Projects A and B is 8.5%. The required rate of return for both projects is 11.7% Which one of the following statements is correct? a. Insufficient information, need to know their NPVS. O b. Reject both projects Accept Project A and reject Project B O d. Accept Project B and reject Project A e. Accept both projects

Projects A and B are independent. Project A has an IRR of 14.1% and Project B has an IRR of 12.5%. The crossover rate for Projects A and B is 8.5%. The required rate of return for both projects is 11.7% Which one of the following statements is correct? a. Insufficient information, need to know their NPVS. O b. Reject both projects Accept Project A and reject Project B O d. Accept Project B and reject Project A e. Accept both projects

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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c) Mr. Tim, the recently hired manager for this potential project is not convinced that using the IRR is sufficient to assess the project’s viability. Calculate the Modified Internal Rate of Return (MIRR) that should be used. d) Based off this MIRR, should the project be accepted? Explain why.
Which of the following statements is false? The NPV and IRR always provide the same accept/reject recommendation for a project with conventional cash flows. IRR provides information in a form that is useful to managers. IRR does not consider the scale of the project. O The IRR is only appropriate when you have unconventional cash flows. It is possible to compute multiple IRRS for a single project.
A certain project has MARR= 15% . Ali is the project manager and wants to select the best appropriate alternative among alternative A with i* = 12% , and alternative B with i*= 12% . Which is the best alternative to consider? Select one: a. do nothing alternative b. both alternatives are accepted C. alternative A d. alternative B
16. Which of the following statements regarding the net present value rule and the rate of return rule is false? A. Accept a project if NPV > cost of investment.B. Accept a project if NPV is positive.C. Accept a project if return on investment exceeds the rate of return on an equivalent-risk investment in the financial market.D. Reject a project if NPV is negative.
question 15. Three Sisters & Co. is considering Projects S and L, whose cash flows are shown below. These projects are mutually beneficial exclusive, equally risky, and not repeatable. If the decision is made by choosing the project with the higher IRR, how much value will be forgone? No that no change in value may exists if there is no conflict in decisions, that is choosing same project under both methods. Furthermore, projects could also have been rejected in the very first place. WACC:8.25% Year 0 1 2 3 4 CFS -$1,225 $650 $ 450 $ 250 $50 CFL -$1,315 $100 $300 $500 $700 -$13.21/ -$24.41/$0.00/$24.41/-55.63/$13.21/$60.00
If a certain project has a breakeven point for 20% of the Initial Investment. What was the original decision of the project? Select one: a. Both b. We do not have enough information to decide c. None d. Accept e. Reject
When two mutually exclusive projects are being compared, explain whythe short-term project might be ranked higher under the NPV criterion ifthe cost of capital is high, whereas the long-term project might be deemedbetter if the cost of capital is low. Would changes in the cost of capital evercause a change in the IRR ranking of two such projects? Why or why not?
8. Which of the following statements is CORRECT? Group of answer choices If two projects are mutually exclusive, then they are likely to have multiple IRRs. For a project to have more than one IRR, then both IRRs must be greater than the WACC. If a project is independent, then it cannot have multiple IRRs. Multiple IRRs can only occur if the signs of the cash flows change more than once. If a project has two IRRs, then the smaller one is the one that is most relevant, and it should be accepted and relied upon.
Nast Inc. is considering Projects S and L, whose cash flows are shown below. These projects are mutually exclusive, equally risky, and not repeatable. If the decision is made by choosing the project with the higher MIRR rather than the one with the higher NPV, how much value will be forgone? Note that under some conditions choosing projects on the basis of the MIRR will cause $0.00 value to be lost. O WACC: CFS CFL O a. $199.41 O b. $0.00 O c. $109.03 O d. $7.51 Oe. $8.32 10.75% 0 -$1,100 -$2,200 1 $375 $725 2 $375 $725 3 $375 $725 st 4 $375 $725
A firm evaluates all of its projects by applying the NPV decision rule. A project under consideration has the following cash flows: Year Cash Flow -$ 41,000 20,000 23,000 14,000 1 What is the NPV of the project if the required return is 11 percent? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) NPV At a required return of 11 percent, should the firm accept this project? O Yes O No
The decision rule for net present value is to: Select one: O a. accept all projects with positive net present values. O b. None of the options O c. accept all projects with cash inflows exceeding initial cost. O d. reject all projects with positive net present values.
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