Which of the following statements is CORRECT? Assume that the project being considered has normal cash flows, with one outflow followed by a series of inflows. O A project's regular IRR is found by compounding the cash inflows at the WACC to find the terminal value (TV), then discounting this TV at the WACC. O A project's regulár IRR is found by discounting the cash inflows at the WACC to find the present value (PV), then compounding this PV to find the IRR. O If a project's IRR is greater than the WACC, then its NPV must be negative. O To find a project's IRR, we must solve for the discount rate that causes the PV of the inflows to equal the PV of the project's costs. O To find a project's IRR, we must find a discount rate that is equal to the WACC.

Which of the following statements is CORRECT? Assume that the project being considered has normal cash flows, with one outflow followed by a series of inflows. O A project's regular IRR is found by compounding the cash inflows at the WACC to find the terminal value (TV), then discounting this TV at the WACC. O A project's regulár IRR is found by discounting the cash inflows at the WACC to find the present value (PV), then compounding this PV to find the IRR. O If a project's IRR is greater than the WACC, then its NPV must be negative. O To find a project's IRR, we must solve for the discount rate that causes the PV of the inflows to equal the PV of the project's costs. O To find a project's IRR, we must find a discount rate that is equal to the WACC.

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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Select all the correct statements. The internal rate of return (IRR) generated by a positive cash flow stream of n payments a. is always given by the solution of a quadratic equation b. is always bigger or equal than -1 c. can be -2 for a suitable cashflow d. can be 17 for a suitable cashflow e. is always smaller or equal than +1
The internal rate of return is the: discount rate that makes present value of cash inflows equal to present value of cash outflows. discount rate that causes a project's after-tax income to equal zero. discount rate that results in a zero net accounting return. rate of return required by the project's investors.
The payback period is a non - discounted cash flow technique that measures: a. The time required to recover the initial investment b. The profitability of the project c. The net present value of the project d. The internal rate of return of the project
Which of the following statements is CORRECT? The discounted payback method recognizes all cash flows over a project's life, and it also adjusts these cash flows to account for the time value of money. The regular payback method was, years ago, widely used, but virtually no companies even calculate the payback today. The regular payback is useful as an indicator of a project's liquidity because it gives managers an idea of how long it will take to recover the funds invested in a project. The regular payback does not consider cash flows beyond the payback year, but the discounted payback overcomes this defect. The regular payback method recognizes all cash flows over a project's life.
3. In a comparison of the NPV and IRR techniques, which of the following is true? statements A. Both methods give the same accept or reject decision, regardless of the pattern of the cash flows. B. IRR is technically superior to NPV and easier to calculate. C. The NPV approach is superior if discount rates are expected to vary over the life of the project. D. NPV and accounting ROCE can be confused.
To calculate net present value of a project with normal cash flows, find the present value of the expected cash flows, and subtract A) retained earnings. B) the cost of the investment. C) the factor loading. D) the payback period.
Which of the following statements is CORRECT? a. If a project with normal cash flows has an IRR greater than the cost of capital, the project must also have a positive NPV. b. If a project with normal cash flows has an IRR less than the cost of capital, the project must have a positive NPV. c. If the NPV is negative, the IRR must also be negative. d. A project's MIRR can never exceed its IRR. e. If Project A's IRR exceeds Project B's, then A must have the higher NPV.
22)
You are choosing between two projects. The cash flows for the projects are given in the attached table ($miilion) . a. What are the IRRs of the two projects? (A &B) b. If your discount rate is 4.9%,what are theNPVs of the two projects? (A & B) c. Why do IRR and NPV rank the two projects differently?
The rate of return that equates the present value of cash inflows and outflows is the: A. hurdle rate.B. desired rate of return.C. internal rate of return. D. minimum rate of return.
Which of the following statements is true regarding the payback period? Multiple Choice It measures the length of time that it takes for a project to recover its initial cost from the discounted net cash inflows that it genera It measures the length of time that it takes for a project to recover its initial cost from the net cash inflows that it generates. It measures the length of time that it takes for a project to recover its initial cost from the incremental net operating income that It measures the length of time that it takes for a project to recover its initial cost from the discounted incremental net operating it generates.
we can still calculate the IRR on incremental cash flows. True or false? Explain with example?

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