Question
Choose a wrong statement regarding capital budgeting. For a business project with a negative net present value (NPV), its internal rate of return (IRR) must
Choose a wrong statement regarding capital budgeting.
For a business project with a negative net present value (NPV), its internal rate of
return (IRR) must be lower than the weighted average cost of capital (WACC)
used to evaluate the project.
Because the NPV and IRR of mutually exclusive projects can give opposite results,
entirely depending on the IRR method to choose a business project can minimize
the risk of misjudgment.
The big difference between the NPV and IRR methods lies on the assumption
regarding the reinvestment of cash flows during the investment periods.
The IRR and NPV methods always give the same results for independent projects.
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