Question
1. For two mutually projects, we assume their NPV profiles cross and the crossover rate is 8%. We assume the require rate of return is
1. For two mutually projects, we assume their NPV profiles cross and the crossover rate is 8%. We assume the require rate of return is r. We use both NPV and IRR methods to analyze the two projects. Which of the following statements is most correct?
A. If r > 8%, NPV and IRR methods get similar decisions.
B. If r > 8%, NPV and IRR methods get conflicting decisions.
C. If r < 8%, NPV and ITT methods get similar decisions.
D. If r < 8%, NPV and IRR methods get conflicting decisions.
E. Both A and D are correct.
2. What's the weakness of the discount payback period?
A, Provides an indication of a project's risk and liquidity.
B. Difficult to understand and calculate.
C. Ignores the time value of money.
D. Ignores cash flows occurring after the payback period.
3. IRR assumes cash flows are reinvested at IRR but MIRR assumes that cash flows are reinvested at WACC.
A. True
B. False
4. If a firm paid $30,000 for a consulting firm for the feasibility analysis of a project. The present value of all other estimated cash inflows and cash outflows which are related to this project is $20,000. Should the investment be undertaken?
A. Yes
B. No
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