Question
All projects (A to G) are 7-year projects. NPV = Net present value. IRR = internal rate of return. MIRR = modified internal rate of
All projects (A to G) are 7-year projects. NPV = Net present value. IRR = internal rate of return. MIRR = modified internal rate of return. PI = profitability index.
| Criteria | Project_A | Project_B | Project_C | Project_D | Project_E | Project_F | Project_G |
| NPV= | $14,154 | $77,992 | $29,515 | $11,564 | ($8,849) | $26,514 | $30,022 |
| IRR= | 28.66% | 20.33% | 19.72% | 45.52% | 9.03% | 16.40% | 16.05% |
| MIRR= | 17.28% | 14.35% | 12.86% | 22.76% | 9.53% | 11.97% | 12.45% |
| PI= | 1.57 | 1.31 | 1.20 | 2.16 | 0.97 | 1.13 | 1.17 |
The discounting rate (r) is 10%.
Which of the following 10 statements are true (there are several, select all that are correct). Consider each statement on its own separate from the others listed:
Question 14 options:
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| If all projects are independent, under the NPV rule, projects A, B, C, D, F, and G should be taken |
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| If projects A & B are mutually exclusive, projects C and D are also mutually exclusive and projects F and G are also mutually exclusive (all others are independent), under the PI rule projects B, C, and G should be undertaken |
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| If all projects are independent, under the NPV rule, all projects should be taken |
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| If all projects are mutually exclusive, under the NPV rule only project B should be taken |
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| If all projects are independent, under the IRR rule only project B should be taken |
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| If projects A & B are mutually exclusive, projects C and D are also mutually exclusive and projects F and G are also mutually exclusive (all others are independent), under the NPV rule projects A, D, and F should be undertaken |
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| If projects A & B are mutually exclusive, projects C and D are also mutually exclusive and projects F and G are also mutually exclusive (all others are independent), under the IRR rule projects A, D, and F should be undertaken |
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| If only projects E and F are mutually exclusive, under the NPV rule only project E should be rejected |
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| If all projects are mutually exclusive, under the NPV rule projects A, B, C, D, F and G should be taken |
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| If projects A & B are mutually exclusive, projects C and D are also mutually exclusive and projects F and G are also mutually exclusive (all others are independent), under the MIRR rule projects B, C, and F should be undertaken |
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Contemporary Quantitative Finance
Authors: Carl Chiarella, Alexander Novikov
2010th Edition
3642034780, 978-3642034787
