Question
here are four principal decision models for evaluating and selecting investment projects: Net present value (NPV) Profitability index (PI) Internal rate of return (IRR) Payback
here are four principal decision models for evaluating and selecting investment projects:
| Net present value (NPV) | |
| Profitability index (PI) | |
| Internal rate of return (IRR) | |
| Payback period (PB) |
Which method recognizes the real option aspects of a proposed capital investment?
PB and discounted PB
None of the methods (NPV, IRR, PI, PB, or discounted PB) recognizes the real option aspects of a capital investment
IRR and PI
IRR
Read the following statements and categorize whether they characterize the IRR, NPV, PB, or PI decision criteria:
| Statement | IRR | NPV | PB | PI | |
|---|---|---|---|---|---|
| Provides an easy-to-interpret benchmark value, since a value of one indicates a project that earns the firms minimum acceptable return |
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| Its value is expressed or denominated in units of a currency, such as dollars |
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| This value should not be used to decide whether to accept or reject a project |
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Fundamentals of Financial Accounting
Authors: Fred Phillips, Robert Libby, Patricia Libby
5th edition
78025915, 978-1259115400, 1259115402, 978-0078025914
