QUESTION 5

Part A: Which of the following ARE correct (Multiple Answer)? MULTIPLE ANSWERS ARE CORRECT CHOOSE ALL THAT APPLY

a. The NPV method makes the better reinvestment assumption compared to IRR

b. The IRR method makes the better reinvestment assumption compared to NPV

c. If the WACC < crossover rate for two mutually exclusive project, the NPV and IRR methods may show discrepancies towards the acceptance of the project.

d. If the WACC > crossover rate for two mutually exclusive project, the NPV and IRR methods may show discrepancies towards the acceptance of the project.

e. When there are discrepancies, one should use the NPV method because of the better reinvestment assumption.

Part B: What are considered incremental cash flows? MULTIPLE ANSWERS MAY BE CORRECT CHOOSE ALL THAT APPLY

		A. Opportunity cost
		B. Cannibalization cost
		C. Sunk costs
		D. Operating cash flows for accepting the project