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are these the correct answers in the blanks If projects are mutually exclusive, only one project can be chosen. The internal rate of return (IRR)and
are these the correct answers in the blanks
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. Projects Y and Z are mutually exclusive projects. Then cash flows and NPV profiles are show as follows. A key to resolving this conflict is the assumed reinvestment rate. The IRR calculation assumes that intermediate cash flows are reinvested at the internal rate of return (IRR), and the NPV calculation implicitly assumes that the rate at which cash flows can be reinvested is the required rate of return. As a result, when evaluating mutually exclusive projects, the NPV method is usually the better decision criterionStep by Step Solution
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