When do ranking conflicts arise in IRR versus NPV? Group of answer choices When the first...
When do ranking conflicts arise in IRR versus NPV?
Group of answer choices
When the first cash flow is negative and the remaining cash flows are positive.
When projects are independent of one another.
When projects are mutually exclusive and the cost of capital is to the left of the crossover point.
All of the above can result in conflicts.
Homework Answers
Option C : When projects are mutually exclusive and the cost of capital is to the left of the crossover point.
Because if Projects are independent it wouldn’t matter much because the firm can accept both the projects.
In case of mutually exclusive projects, a firm might get into a conflict if 1 of them is providing better NPV while other is providing better IRR.
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When do ranking conflicts arise in IRR versus NPV?
Group of answer choices
When the first...
B) Ranking conflicts can arise if one relies on IRR instead of NPV when The first...
B) Ranking conflicts can arise if one relies on IRR instead of NPV when The first cash flow is negative and the remaining cash flows are positive Projects are independent of one another. C) A project has more than one NPV. D) Projects are mutually exclusive. E) The profitability index is greater than one. The cash flows of a new project that come at the expense of a firm's existing projects are: A) Salvage value expenses. B) Net working capital...
11. NPV versus IRR Consider the following two mutually exclusive projects: Year Cash Flow (X) Cash...
11. NPV versus IRR Consider the following two mutually exclusive projects: Year Cash Flow (X) Cash Flow (Y) -$23,900 -$23,900 13,100 9,300 9,480 10,620 7,890 11,180 Sketch the NPV profiles for X and Y over a range of discount rates from 0 to 25 percent. What is the crossover rate for these two projects?
13. NPV versus IRR Consider the following two mutually exclusive projects: Year Cash Flow (X) Cash...
13. NPV versus IRR Consider the following two mutually exclusive projects: Year Cash Flow (X) Cash Flow (Y) -$10,000 -$10,000 5,400 4,500 3,400 3,600 4,500 5,400 Sketch the NPV profiles for X and Y over a range of discount rates from zero to 25 percent. What is the crossover rate for these two projects?
First Blank: always, sometimes, never Second Blank: IRR, MIRR, required rate of return Third Blank: IRR,...
First Blank: always, sometimes, never
Second Blank: IRR, MIRR, required rate of return
Third Blank: IRR, MIRR, required rate of return
Fourth Blank: IRR method, NPV method
6. Understanding the NPV profile If projects are mutually exclusive, only one project can be chosen. The internal rate of return (IRR) and the net present value (NPV) methods will not always choose the same project. If the crossover rate on the NPV profile is below the horizontal axis, the methods will agree....
IRR A project's internal rate of return (IRR) is the -Select- The IRR is an estimate...
IRR A project's internal rate of return (IRR) is the -Select- The IRR is an estimate of the project's rate of return, and it is comparable to the -Select-on a bond. The equation for calculating the IRR is: ;that forces the PV of its inflows to equal its cost. CF2 CFN 1 IRF 1 IRF 1IR CFt t-1 (1 +IRR) CFt is the expected cash flow in Period t and cash outflows are treated as negative cash flows. There must...
Capital Budgeting Decision Criteria: IRR IRR A project's internal rate of return (IRR) is the -Select-compound...
Capital Budgeting Decision Criteria: IRR IRR A project's internal rate of return (IRR) is the -Select-compound ratediscount raterisk-free rateCorrect 1 of Item 1 that forces the PV of its inflows to equal its cost. The IRR is an estimate of the project's rate of return, and it is comparable to the -Select-YTMcoupongainCorrect 2 of Item 1 on a bond. The equation for calculating the IRR is: CFt is the expected cash flow in Period t and cash outflows are treated...
Dropdown options first 2 blanks: (internal rate of return IRR, required rate of return, modified internal...
Dropdown options first 2 blanks: (internal rate of return IRR,
required rate of return, modified internal rate of return MIRR)
Dropdown options 3rd blank: (NPV method, IRR method)
If projects are mutually exclusive, only one project can be chosen. The internal rate of return (IRR) and the net present value (NPV) methods will not always choose the same project. If the crossover rate on the NPV profile is below the horizontal axis, the methods will agree. always Projects Y and...
Project selection ambiguity can arise if you rely on the internal rate of return (IRR) instead...
Project selection ambiguity can arise if you rely on the internal rate of return (IRR) instead of the net present value (NPV) when A project's cash flows are non-conventional There are multiple IRRs. Projects are mutually exclusive All of the above
A project's NPV profile graph intersects the Y-axis at 0% cost of capital and intersects the...
A project's NPV profile graph intersects the Y-axis at 0% cost of capital and intersects the X-axis at the project's Select (where NPV = 0). The Y-axis intersection point represents the project's undiscounted NPV. The point at which 2 projects' profiles cross one another is the crossover rate. The crossover rate can be found by calculating the Select of the differences in the projects' cash flows (Project Delta). A Select NPV profile indicates that increases in the cost of capital...
P9-12 NPV versus IRR (L01, 5] Bruin, Inc., has identified the following two mutually exclusive projects:...
P9-12 NPV versus IRR (L01, 5] Bruin, Inc., has identified the following two mutually exclusive projects: Year Nm Cash Flow (A) -$37,100 19,480 14,980 12,480 9,480 Cash Flow (B) -$37,100 6,940 13,440 19,940 23,940 a. What is the IRR for Project A?
B) Ranking conflicts can arise if one relies on IRR instead of NPV when The first cash flow is negative and the remaining cash flows are positive Projects are independent of one another. C) A project has more than one NPV. D) Projects are mutually exclusive. E) The profitability index is greater than one. The cash flows of a new project that come at the expense of a firm's existing projects are: A) Salvage value expenses. B) Net working capital...
11. NPV versus IRR Consider the following two mutually exclusive projects: Year Cash Flow (X) Cash Flow (Y) -$23,900 -$23,900 13,100 9,300 9,480 10,620 7,890 11,180 Sketch the NPV profiles for X and Y over a range of discount rates from 0 to 25 percent. What is the crossover rate for these two projects?
13. NPV versus IRR Consider the following two mutually exclusive projects: Year Cash Flow (X) Cash Flow (Y) -$10,000 -$10,000 5,400 4,500 3,400 3,600 4,500 5,400 Sketch the NPV profiles for X and Y over a range of discount rates from zero to 25 percent. What is the crossover rate for these two projects?
First Blank: always, sometimes, never
Second Blank: IRR, MIRR, required rate of return
Third Blank: IRR, MIRR, required rate of return
Fourth Blank: IRR method, NPV method
6. Understanding the NPV profile If projects are mutually exclusive, only one project can be chosen. The internal rate of return (IRR) and the net present value (NPV) methods will not always choose the same project. If the crossover rate on the NPV profile is below the horizontal axis, the methods will agree....
IRR A project's internal rate of return (IRR) is the -Select- The IRR is an estimate of the project's rate of return, and it is comparable to the -Select-on a bond. The equation for calculating the IRR is: ;that forces the PV of its inflows to equal its cost. CF2 CFN 1 IRF 1 IRF 1IR CFt t-1 (1 +IRR) CFt is the expected cash flow in Period t and cash outflows are treated as negative cash flows. There must...
Dropdown options first 2 blanks: (internal rate of return IRR,
required rate of return, modified internal rate of return MIRR)
Dropdown options 3rd blank: (NPV method, IRR method)
If projects are mutually exclusive, only one project can be chosen. The internal rate of return (IRR) and the net present value (NPV) methods will not always choose the same project. If the crossover rate on the NPV profile is below the horizontal axis, the methods will agree. always Projects Y and...
Project selection ambiguity can arise if you rely on the internal rate of return (IRR) instead of the net present value (NPV) when A project's cash flows are non-conventional There are multiple IRRs. Projects are mutually exclusive All of the above
A project's NPV profile graph intersects the Y-axis at 0% cost of capital and intersects the X-axis at the project's Select (where NPV = 0). The Y-axis intersection point represents the project's undiscounted NPV. The point at which 2 projects' profiles cross one another is the crossover rate. The crossover rate can be found by calculating the Select of the differences in the projects' cash flows (Project Delta). A Select NPV profile indicates that increases in the cost of capital...
P9-12 NPV versus IRR (L01, 5] Bruin, Inc., has identified the following two mutually exclusive projects: Year Nm Cash Flow (A) -$37,100 19,480 14,980 12,480 9,480 Cash Flow (B) -$37,100 6,940 13,440 19,940 23,940 a. What is the IRR for Project A?
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