A) A project's regular IRR is found by compounding the cash inflows at the cost of capital to find the present value (PV) , then discounting the TV to find the IRR.
B) If a project's IRR is smaller than the cost of capital, then its NPV will be positive.
C) A project's IRR is the discount rate that causes the PV of the inflows to equal the project's cost.
D) If a project's IRR is positive, then its NPV must also be positive.
E) A project's regular IRR is found by compounding the initial cost at the cost of capital to find the terminal value (TV) , then discounting the TV at the cost of capital.
G) All of the above
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A) The IRR method can never be subject to the multiple IRR problem, while the MIRR method can be.
B) One reason some people prefer the MIRR to the regular IRR is that the MIRR is based on a generally more reasonable reinvestment rate assumption.
C) The higher the cost of capital, the shorter the discounted payback period.
D) The MIRR method assumes that cash flows are reinvested at the crossover rate.
E) The MIRR and NPV decision criteria can never conflict.
G) D) and E)
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A) The payback method is generally regarded by academics as being the best single method for evaluating capital budgeting projects.
B) The discounted payback method is generally regarded by academics as being the best single method for evaluating capital budgeting projects.
C) The net present value method (NPV) is generally regarded by academics as being the best single method for evaluating capital budgeting projects.
D) The modified internal rate of return method (MIRR) is generally regarded by academics as being the best single method for evaluating capital budgeting projects.
E) The internal rate of return method (IRR) is generally regarded by academics as being the best single method for evaluating capital budgeting projects.
G) All of the above
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B) False
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B) False
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A) Project L.
B) Both projects are equally sensitive to changes in the cost of capital since their NPVs are equal at all costs of capital.
C) Neither project is sensitive to changes in the discount rate, since both have NPV profiles that are horizontal.
D) The solution cannot be determined because the problem gives us no information that can be used to determine the projects' relative IRRs.
E) Project S.
G) B) and C)
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B) False
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B) False
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B) False
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B) False
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A) If a project's IRR is equal to its cost of capital, then under all reasonable conditions, the project's IRR must be negative.
B) If a project's IRR is equal to its cost of capital, then under all reasonable conditions the project's NPV must be zero.
C) There is no necessary relationship between a project's IRR, its cost of capital, and its NPV.
D) When evaluating mutually exclusive projects, those projects with relatively long lives will tend to have relatively high NPVs when the cost of capital is relatively high.
E) If a project's IRR is equal to its cost of capital, then, under all reasonable conditions, the project's NPV must be negative.
G) A) and E)
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A) If the cost of capital is 9%, Project A's NPV will be higher than Project B's.
B) If the cost of capital is 6%, Project B's NPV will be higher than Project A's.
C) If the cost of capital is greater than 14%, Project A's IRR will exceed Project B's.
D) If the cost of capital is 9%, Project B's NPV will be higher than Project A's.
E) If the cost of capital is 13%, Project A's NPV will be higher than Project B's.
G) C) and E)
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