Which of the following statements is (or are) true? (Select all correct responses.] O For a borrowing (or "delayed investment" project), the internal rate of return (IRR) decision rule states that if the IRR exceeds the benchmark rate, accept the project. O For an investment, the IRR decision rule states that if the IRR exceeds the benchmark rate, accept the project. NPV should never be used if the project under consideration has nonconventional cash flows. O A decision maker who is considering several mutually exclusive investment opportunities should use IRR to choose the best one among them. The payback investment rule might not use all possible cash flows in its calculation. In some instances, for example for mutually exclusive investments, the NPV rule is not as conceptually legitimate as is the payback rule. O Practitioners generally prefer the payback decision criterion to the IRR because payback considers the time value of money while IRR does not. O The main weakness of the NPV decision criterion is that it ignores distant cash flows.

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
icon
Related questions
Question
Question 10
2 pts
Which of the following statements is (or are) true?
[Select all correct responses.]
O For a borrowing (or "delayed investment" project), the internal rate of return (IRR) decision rule states that if
the IRR exceeds the benchmark rate, accept the project.
O For an investment, the IRR decision rule states that if the IRR exceeds the benchmark rate, accept the
project.
O NPV should never be used if the project under consideration has nonconventional cash flows.
D A decision maker who is considering several mutually exclusive investment opportunities should use IRR to
choose the best one among them.
O The payback investment rule might not use all possible cash flows in its calculation.
O In some instances, for example for mutually exclusive investments, the NPV rule is not as conceptually
legitimate as is the payback rule.
Practitioners generally prefer the payback decision criterion to the IRR because payback considers the time
value of money while IRR does not.
The main weakness of the NPV decision criterion is that it ignores distant cash flows.
Transcribed Image Text:Question 10 2 pts Which of the following statements is (or are) true? [Select all correct responses.] O For a borrowing (or "delayed investment" project), the internal rate of return (IRR) decision rule states that if the IRR exceeds the benchmark rate, accept the project. O For an investment, the IRR decision rule states that if the IRR exceeds the benchmark rate, accept the project. O NPV should never be used if the project under consideration has nonconventional cash flows. D A decision maker who is considering several mutually exclusive investment opportunities should use IRR to choose the best one among them. O The payback investment rule might not use all possible cash flows in its calculation. O In some instances, for example for mutually exclusive investments, the NPV rule is not as conceptually legitimate as is the payback rule. Practitioners generally prefer the payback decision criterion to the IRR because payback considers the time value of money while IRR does not. The main weakness of the NPV decision criterion is that it ignores distant cash flows.
Expert Solution
trending now

Trending now

This is a popular solution!

steps

Step by step

Solved in 2 steps

Blurred answer
Knowledge Booster
Capital Budgeting
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.
Similar questions
Recommended textbooks for you
Essentials Of Investments
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
FUNDAMENTALS OF CORPORATE FINANCE
FUNDAMENTALS OF CORPORATE FINANCE
Finance
ISBN:
9781260013962
Author:
BREALEY
Publisher:
RENT MCG
Financial Management: Theory & Practice
Financial Management: Theory & Practice
Finance
ISBN:
9781337909730
Author:
Brigham
Publisher:
Cengage
Foundations Of Finance
Foundations Of Finance
Finance
ISBN:
9780134897264
Author:
KEOWN, Arthur J., Martin, John D., PETTY, J. William
Publisher:
Pearson,
Fundamentals of Financial Management (MindTap Cou…
Fundamentals of Financial Management (MindTap Cou…
Finance
ISBN:
9781337395250
Author:
Eugene F. Brigham, Joel F. Houston
Publisher:
Cengage Learning
Corporate Finance (The Mcgraw-hill/Irwin Series i…
Corporate Finance (The Mcgraw-hill/Irwin Series i…
Finance
ISBN:
9780077861759
Author:
Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor
Publisher:
McGraw-Hill Education