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There are four principal decision models for evaluating and selecting investment projects: Net present value (NPV) Profitability index (PI) Internal rate of return (IRR) Payback
There 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) |
1.) Which criteria assume that the projects net cash flows (NCFs) are reinvested at the projects internal rate of return?
IRR
NPV and PI
IRR and PI
PI and discounted PB
2.) Categorize the following statements whether they characterize the IRR, NPV, PB, or PI decision criteria:
Statement | IRR | NPV | PB | PI | |
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This value is expressed in years, or some portion thereof |
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If its value is greater than or equal to one, then the project should be accepted |
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The value is the discount rate or return at which the projects net present value is zero |
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