Which of the following statements is FALSE? A. The payback investment rule is based on the...
Which of the following statements is FALSE?
A.
The payback investment rule is based on the notion that an opportunity that pays back its initial investments quickly is a good idea.
B.
A NPV will always exist for an investment opportunity.
C.
An IRR will always exist for an investment opportunity.
D.
In general, there can be as many IRRs as the number of times the project's cash flows change sign over time.
Homework Answers
C. An internal rate of return (IRR) will always exist for an investment opportunity.
Add Answer to:
Which of the following statements is FALSE?
A.
The payback investment rule is based on the...
7) Which of the following statements is FALSE? A) The IRR investment rule will identify the...
7) Which of the following statements is FALSE? A) The IRR investment rule will identify the correct decision in many, but not all, situations. B) By setting the NPV equal to zero and solving for r, we find the IRR. C) If you are unsure of your cost of capital estimate, it is important to determine how sensitive your analysis is to errors in this estimate. D) The simplest investment rule is the NPV investment rule. 8) Which of the...
9. Which of the following statements is FALSE? A. There are situations in which multiple IRRs...
9. Which of the following statements is FALSE? A. There are situations in which multiple IRRs exist. B. Since the IRR rule is based upon the rate at which the NPV equals zero, like the NPV decision rule, the IRR decision rule will always identify the correct investment decisions. C. The IRR investment rule states that you should take any investment opportunity where the IRR exceeds the opportunity cost of capital. D. The IRR investment rule states you should turn...
Which of the statements below is TRUE? One problem with IRR as a decision rule is...
Which of the statements below is TRUE? One problem with IRR as a decision rule is that if the cash flow is not standard, there is a possibility of multiple IRRs for a single project. When we talk about standard cash flow for a project, we assume an initial cash outflow at the beginning of the project and negative cash flows in the future. For every period that the cash flow has a change of sign (negative to positive or...
1. We can get multiple IRRS when we draw an NPV profile for a project when:...
1. We can get multiple IRRS when we draw an NPV profile for a project when: a. The project is riskless. b. The project requires a large investment. c. The project cash flows are uneven and change in sign. d. The project has a balloon payment. e. The opportunity cost of capital is high. 2. The length of time required for an investment to generate cash flows sufficient to recover its initial cost, without taking into account time value of...
Problem 1) Take the difference between the payback period of Projects A and B, i.e.,...
Problem 1) Take the difference between the payback period of
Projects A and B, i.e., calculate: X = Payback Period of Project A
- Payback Period of Project B.
Select one:
a)-3
b)-2
c)-1
d)0
e)1
f)2
g)3
h)Insufficient information
Problem 1) What is (are) the posiive IRR(s) of Project C?
Select one:
a)0%
b)100%
c)104.3% is one of the IRRs and another IRR exists
d)0% is one of the IRRs and another IRR exists
e)7.7% only
f)56.3% is...
Which of the following statements is correct? A project's discounted payback period (DBP) is normally shorter...
Which of the following statements is correct? A project's discounted payback period (DBP) is normally shorter than its traditional payback period (PB) because DPB accounts for the time value of money, whereas PB does not. To compute the NPV for a project, the firm's required rate of return must be known. To compute a project's internal rate of return (IRR), the firm's required rate of return is not used because the IRR is the discount rate where the project's NPV...
Question 16 (1 point) Which of the following statements is correct? A) The regular payback is...
Question 16 (1 point) Which of the following statements is correct? A) 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. OB) The regular payback does not consider cash flows beyond the payback year, but discounted payback overcomes this defect. OC) The discounted payback method recognizes all cash flows over a project's life, and it also adjusts...
5. The NPV and payback period Aa Aa What information does the payback period provide? Suppose...
5. The NPV and payback period Aa Aa What information does the payback period provide? Suppose you are evaluating a project with the expected future cash inflows shown in the following table. Your boss has asked you to calculate the project's net present value (NPV). You don't know the project's initial cost, but you do know the project's regular, or conventional, payback period is 2.50 years. If the project's weighted average cost of capital (WACC) is 790, the project's NPV...
Based on the principles of capital budgeting, which of the following statements is most correct? Select...
Based on the principles of capital budgeting, which of the following statements is most correct? Select one: O A. If a project's cash flows are classified as "normal", its MIRR must be positive. B. If a project's cash flows are classified as "normal", it will have multiple potential IRRs. O C. "Normal" cash flows are defined as a cash flow stream that has one or more negative cash flows followed by a stream of positive cash flows and then one...
Which of the following statements about investment decision models is true?(calculation steps are not needed)a)The discounted...
Which of the following statements about investment decision models is true?(calculation steps are not needed)a)The discounted payback rate takes into account cash flows for all periods.b)The payback rule ignores all cash flows after the end of the payback period. c)The net present value model says to accept investment opportunities when their rates of return exceed the company’s incremental borrowing rate.d)The internal rate of return rule is to accept the investment if the opportunity cost of capital is greater than the...
7) Which of the following statements is FALSE? A) The IRR investment rule will identify the correct decision in many, but not all, situations. B) By setting the NPV equal to zero and solving for r, we find the IRR. C) If you are unsure of your cost of capital estimate, it is important to determine how sensitive your analysis is to errors in this estimate. D) The simplest investment rule is the NPV investment rule. 8) Which of the...
1. We can get multiple IRRS when we draw an NPV profile for a project when: a. The project is riskless. b. The project requires a large investment. c. The project cash flows are uneven and change in sign. d. The project has a balloon payment. e. The opportunity cost of capital is high. 2. The length of time required for an investment to generate cash flows sufficient to recover its initial cost, without taking into account time value of...
Problem 1) Take the difference between the payback period of
Projects A and B, i.e., calculate: X = Payback Period of Project A
- Payback Period of Project B.
Select one:
a)-3
b)-2
c)-1
d)0
e)1
f)2
g)3
h)Insufficient information
Problem 1) What is (are) the posiive IRR(s) of Project C?
Select one:
a)0%
b)100%
c)104.3% is one of the IRRs and another IRR exists
d)0% is one of the IRRs and another IRR exists
e)7.7% only
f)56.3% is...
Question 16 (1 point) Which of the following statements is correct? A) 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. OB) The regular payback does not consider cash flows beyond the payback year, but discounted payback overcomes this defect. OC) The discounted payback method recognizes all cash flows over a project's life, and it also adjusts...
5. The NPV and payback period Aa Aa What information does the payback period provide? Suppose you are evaluating a project with the expected future cash inflows shown in the following table. Your boss has asked you to calculate the project's net present value (NPV). You don't know the project's initial cost, but you do know the project's regular, or conventional, payback period is 2.50 years. If the project's weighted average cost of capital (WACC) is 790, the project's NPV...
Based on the principles of capital budgeting, which of the following statements is most correct? Select one: O A. If a project's cash flows are classified as "normal", its MIRR must be positive. B. If a project's cash flows are classified as "normal", it will have multiple potential IRRs. O C. "Normal" cash flows are defined as a cash flow stream that has one or more negative cash flows followed by a stream of positive cash flows and then one...
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