12. Which of the following statements is most correct?

a.

If a projects internal rate of return (IRR) exceeds the cost of capital, then the projects net present value (NPV) must be positive.

b.

The IRR calculation implicitly assumes that all cash flows are reinvested at a rate of return equal to the cost of capital.

c.

If Project A has a higher IRR than Project B, then Project A must also have a higher NPV.

15. Which of the following statements is CORRECT?

a.

One defect of the IRR method is that it does not take account of cash flows over a projects full life.

b.

One defect of the IRR method is that it does consider the time value of money.

c.

One defect of the IRR method is that it assumes that the cash flows to be received from a project can be reinvested at the IRR itself, and that assumption is often not valid.

d.

One defect of the IRR method is that it does not take account of the time value of money.

Clear my choice

10. Beit-Jala Corp. is planning to undertake a project requiring initial investment of $105,000,000. The corp. project is expected to generate $25 million per year for 7 years. The payback period of the project.

a.

6.9 years

b.

5.9 years

c.

4.2 years

d.

4.3 years