Question
Briefly answer to the questions that follow. An answer of 1-3 sentences for each question should suffice. A: If a business has sufficient cash, it
Briefly answer to the questions that follow. An answer of 1-3 sentences for each question should suffice.
A: If a business has sufficient cash, it should accept only projects with positive NPVs. True or False?
B: A proposed project has a negative cash flow today, then positive cash flows for the intermediate years, then a negative cash flow again the final year. How many IRRs does this proposed project generate?
C: If the IRR is above the cost of capital, then we reject the project (assuming it agrees with the NPV rule). True or False?
D: When considering two mutually exclusive projects, if NPV gives one conclusion and IRR gives another, which one should we default to? Why?
E: When assessing the attractiveness of buying a new piece of equipment, one factor to consider is the net salvage at the end of the life of the equipment. When estimating the net salvage values effect on the project cash flows, how should one compute the tax consequences from the net salvage value?
F: When computing project cash flows, should we include the effects of taxes? What about revenues?
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