Question
True and False 1. The IRR and NPV will always lead to the same decision when projects are mutually exclusive. 2. The profitability index (PI)
True and False
1. The IRR and NPV will always lead to the same decision when projects are mutually exclusive.
2. The profitability index (PI) is calculated dividing the present value of the after-tax cash flows by the cost (the initial outlay).
3. Implicit in the calculation of the IRR is the assumption that the cash flows are reinvested at the IRR.
4. If the IRR is less than the required return then the project will be accepted.
5. If we define value as the present value of future cash flows, then the net present value (NPV) represents the excess value (or economic profit) captured by purchasing an asset.
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