The Rate of Return (ROR) for five different Mutually Exclusive project alternatives are provided in the table below. Alt. 1 Alt. 2 Alt. 3 Alt. 4 Alt. 5 ROR (%) 17% 15% 21% 25% 19% Which of the five Alternatives are economically desirable or should be accepted? Note: This is a Multiple Answer Question. Select all of following options that are correct. Alt. 4 Alt. 3 Not enough information is provided to determine the economically attractive Alternatives. Alt. 1 Alt. 5 Alt. 2

The Rate of Return (ROR) for five different Mutually Exclusive project alternatives are provided in the table below. Alt. 1 Alt. 2 Alt. 3 Alt. 4 Alt. 5 ROR (%) 17% 15% 21% 25% 19% Which of the five Alternatives are economically desirable or should be accepted? Note: This is a Multiple Answer Question. Select all of following options that are correct. Alt. 4 Alt. 3 Not enough information is provided to determine the economically attractive Alternatives. Alt. 1 Alt. 5 Alt. 2

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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When two mutually exclusive projects are being compared, explain why the short-term project might be ranged higher under the NVP criterion if the cost of the capital is high, whereas the long-term project might be deemed better if the cost of capital is low. Would changes in the cost of capital ever cause a change in the IRR ranking of two such projects? Why or why not?
The internal rate of return (IRR) is the: Multiple Choice discount rate that results in a zero net present value for the project. discount rate that causes a project's aftertax income to equal zero.
Subject :- Accounting
None
NPV & IRR Refer to the scenario above. The project(s) you select may vary depending on the WACC and whether the projects are independent or mutually exclusive. Which statement is INCORRECT? If the projects are independent and the WACC is 11.0%, both projects A and B are acceptable. If the projects are independent, Project A would be acceptable if the WACC is 17%, but Project B would not. If a project's NPV is negative, the project cannot be accepted. If the projects are mutually exclusive and the WACC is 11.0%, only project B is acceptable. If the projects are mutually exclusive and the WACC is 6.0%, only project B is acceptable.
Possible outcomes for three investment alternatives and their probabilities of occurrence are given next. Failure Acceptable Successful Alternative 1 Alternative 2 Alternative 3 Outcomes Probability Outcomes Probability Outcomes Probability 50 0.40 70 0.20 85 0.40 0.20 130 0.40 325 0.40 0.40 265 0.40 410 0.20 Alternative 1 Alternative 2 Alternative 3 80 135 Using the coefficient of variation, rank the three alternatives in terms of risk from lowest to highest. Note: Do not round intermediate calculations. Round your answers to 3 decimal places. Coefficient of Variation Rank
When choosing between two projects of different scales, which of the following methodologies is best employed? a. Probability index to rank projects b. Equivalent annuities method c. Replacement chain method d. IRR method
e. IMPORTANT Note that from this example that a higher IRR for a nindividual alternative does not gurantee that the alternatvie is more economical than the one with a lower IRR. It is the incremental IRR value relative to the MARR that determines which alternative is more economical. The result of the incremental analysis are always the same as those of the PW,AW, or FW anaylsis
When faced with a set of independent projects, one should select (choose the best answer) all projects with a PI greater than one. all projects with an IRR greater than the hurdle rate all projects with a positive NPV or an IRR greater than the hurdle rate or a PI greater than one. all projects with a positive NPV or an IRR greater than the hurdle rate. all projects with an IRR greater than the hurdle rate or a PI greater than one. all projects with a positive NPV or a PI greater than the one. all projects with a positive NPV
Which of the following were listed as potential Problems or Issues associated with Using a Rate of Return Approach to justifying single or multiple Mutually Exclusive projects? Note: This is a Multiple Answer question. Please select all of the following options you think are correct? O The ROR calculations are typically more complex than the PW, AW, or FW methods and frequently require the use of trial and error techniques. O You cannot rely on the best Mutually Exclusive project to have the highest ROR. O An incremental approach is required to reliably determine the best project when comparing multiple Mutually Exclusive projects with the ROR approach. O This method assumes that any net positive cash flows are reinvested at the ROR rate. If the ROR rate is substantially larger than MARR, this might not be a realistic assumption. OFor any sequence of Net Cash Flows with more than one sign chance over the life of the project there may be more than one ROR value that satisfies the Rate…
State whether the following statement true or false and provide a brief explanation
Here are the four answer options provided for this question: (a) The project's PI is 21.48 percent and the project should be accepted. (b) The project's PI is 16.48 percent and the project should be accepted. (c) The project's PI is 8.48 percent and the project should be accepted. (d) The project's PI is 8.48 percent and the project should be rejected.

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