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1. We can get multiple IRRS when we draw an NPV profile for a project when: a. The project is riskless. b. The project requir
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Answer #1

1. We can get multiple IRRs when we draw an NPV Profile for a project when the project cashflows are uneven and change in sign.

Explanation - Multiple IRR is possible for unconventional cash flows i.e. the cash flows which changes the sign. The NPV profile curve which is graph between NPV (Y-axis) and Discount rate (x-axis) will intersect the x-axis at more than one points because the cash flows change sign. Hence they will have multiple IRRs

Answer -> c

2. The length of the time required for an investment to generate cash flows sufficient to recover its initial cost, without taking into account time value of money is its Payback period

Explanation - The above statement is the definition of payback period i.e., the payback period is the time it takes to recover the initial cost of investment.

Answer -> c

3. The internal rate of return can be best stated as an investment is acceptable if its IRR exceeds the required return, else it should be rejected

Explanation - The above statement is the IRR Rule for accepting/ rejecting a project. If the IRR exceeds the required rate of return means that the project is a profitable one. IRR greater than the required rate of return means that there will be a higher cash flows to the investor

Answer -> d

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