Which of the following statements is CORRECT? O Projects with "normal" cash flows can have two or more real IRRS. O Projects with "normal" cash flows must have two changes in the sign of the cash flows, e.g., from negative to positive to negative. If there are more than two sign changes, then the cash flow stream is "nonnormal." O The "multiple IRR problem" can arise if a project's cash flows are "normal." O Projects with "nonnormal" cash flows are almost never encountered in the real world. O Projects with "normal" cash flows can have only one real IRR.

Which of the following statements is CORRECT? O Projects with "normal" cash flows can have two or more real IRRS. O Projects with "normal" cash flows must have two changes in the sign of the cash flows, e.g., from negative to positive to negative. If there are more than two sign changes, then the cash flow stream is "nonnormal." O The "multiple IRR problem" can arise if a project's cash flows are "normal." O Projects with "nonnormal" cash flows are almost never encountered in the real world. O Projects with "normal" cash flows can have only one real IRR.

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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1.True or flase . Even thugh thr amounts and timing of the cash flow may differ, the appropiate LCM rate makes equal in economic sense. 2. true or false. when only costs are involed. The AE method is called the project equivalent cost? 3. true or false. the cost fro a depreciable asset is the invoice cost fot he asset
A project does not necessarily have a unique IRR.(Refer to the previous problem for more informationon IRR.) Show that a project with the following cashflows has two IRRs: year 1, 2$20; year 2, $82; year3, 2$60; year 4, $2. (Note: It can be shown that ifthe cash flow of a project changes sign only once, theproject is guaranteed to have a unique IRR.)
Cash flows cannot be added together unless. O they are both negative O the problem is using compound interest O they are both positive O they occur during the same time period
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.
Which of the following statements is most FALSE? A. If a project with normal cash flows has a positive NPV, it will definitely have an MIRR greater than the cost of capital. B. If a project with normal cash flows has an IRR that is greater than the cost of capital, then taking on that project would decrease the value of the firm. C. If a project has normal cash flows, then the MIRR has to be between k and IRR if the project has positive interim cash flows (cash flows between t=0 and the end of the project). D. If a project with normal cash flows does not have any interim cash flows, the project's IRR will equal the project's MIRR. E. Multiple IRRS can exist for a project if the project has nonnormal cash flows. OA OB OC
In which of the following cases is IRR unreliable? I. When looking at mutually exclusive projects II. For a project that has positive cash flow in Year 1, but negative cash flow in Year 2 Both Neither Only I Only II
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. a. If Project A has a higher IRR than Project B, then Project A must also have a higher NPV. b. If a project has normal cash flows and its IRR exceeds its cost of capital, then the project's NPV must be positive. c. The IRR calculation implicitly assumes that all cash flows are reinvested at the cost of capital. d. If Project A has a higher IRR than Project B, then Project A must have the lower NPV. e. The IRR calculation implicitly assumes that cash flows are withdrawn from the business rather than being reinvested in the business.
Which of the following is/are true for the average accounting return method of project analysis? I. does not need a cutoff rate II. ignores time value of money II. is based on project's cash flows IV. easily obtainable information for computation Multiple Choice I only I, II, II, and IV
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.
45. Which of the following statements is CORRECT? a. The definition of "normal" cash flows is that the cash flow stream has one or more negative cash flows followed by a stream of positive cash flows and then one negative cash flow at the end of the project's life. b. If a project has "normal" cash flows, then it will have exactly two real IRRs. c. If a project has "normal" cash flows, then it can have only one real IRR, whereas a project with "nonnormal" cash flows might have more than one real IRR. d. If a project has "normal" cash flows, then its IRR must be positive. e. If a project has "normal" cash flows, then its MIRR must be positive.
The AW of a project can be estimated by reducing all cash flows including the capital investment, salvage value in terms of annualized cash flows at an interest rate( i). Select one: True False
One of the benefit of the pay back period is that it focuses on the timing of the project`s benefits and costs, even though it does not adjust the cash flows for the time value of money Select one: True False

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