Question
11. You are provided the projected IS of a project & you are asked to determine its cash flow for the purpose of evaluating it.
11. You are provided the projected IS of a project & you are asked to determine its cash flow for the purpose of evaluating it. Which of the following statements is true?
a. The cash flow of that project is earnings before interest & taxes (EBIT)
b. The cash flow of that project is net income + depreciation + interest expense
c. The cash flow of that project is EBIT + depreciation - taxes
d. Statements b & c are true
e. None of the above
20. Which of the following statements is true?
a. A project may have more than one NPV at a given discount rate
b. A project may have only one IRR
c. For 2 mutually exclusive projects whose NPV profiles intersect, the rankings of the 2 projects following NPV & IRR must conflict no matter what is the discount rate
d. All of the above
e. None of the above
21. Which of the following statements is true?
a. The contribution of a project to a firms value is simply the NPV of the project
b. When the NPV profile of the project is not a downward sloping curve, applying the NPV rule may lead to a wrong investment decision
c. When a firm is evaluating a single project, NPV & IRR typically do not lead to the same conclusion regarding the profitability of the project
d. All of the above
e. Only a & c are true statements
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started