Question

QUESTION 12 Opportunity costs should be included in the analysis of a project. True False QUESTION 13 Sunk costs are considered cash flows of a project. True False QUESTION 14 The crossover point is defined as the discount rate that: Indicates the point where the IRR equals zero as IRR moves in a downward direction. Causes the net present value of a project to equal zero. Causes the IRR of one project to exceed the IRR of a second project. Makes the net present values of two projects equal. Causes a project to move from a positive net present value to a negative net present value.

Answer 1

QUESTION 12

TRUE

Opportunity costs are included in the analysis of a project. The discount rate to evaluate the project is nothing but the opportunity cost of capital.

QUESTION 13

FALSE

Sunk costs are not considered in the cash flow of a project. Sunk costs are not recoverable and hence they are not considered.

QUESTION 14

Option D is correct.

The rate at which the NPV of two projects equal is the crossover point.

Option A is incorrect because it doesn't define the crossover point

Option B is incorrect because it is the definition of IRR

Option C is incorrect because it doesn't define the crossover point

Option E is incorrect because the crossover rate is not the rate at which NPV turns negative

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