Use the following data to answer Questions 17 and 18: An analyst has gathered the following information about a project: Cost: $10,000 Annual cash inflow: $4,000 Life: 4 years Cost of capital: 12%

17. Which of the following statements about the project is least accurate? *

4 points

A. The discounted payback period is 3.5 years.

B. The IRR of the project is 21.9%; accept the project.

C. The NPV of the project is +$2,149; accept the project.

D. None of the above.

18. Which of the following statements about the project is least accurate? *

4 points

A. The discounted payback period is 3.15 years.

B. The IRR of the project is 21.9%; accept the project.

C. The NPV of the project is +$2,149; accept the project.

D. The MIRR of the project is 17.09%; accept the project.

E. None of the above

19. A company is evaluating the following mutually exclusive capital budgeting projects for investment over the next two years. Two new machines with costs of $4 million each and computer software upgrade with a cost of $1 million and multi-year replacement of two aging machines. All of these projects have positive net present values and the available budget is $10 million. The company should accept: *

5 points

A. All of these projects.

B. Those projects with the highest expected rates of return over the 2-year capital budgeting period.

C. Those projects with the highest present value of expected future cash flows relative to required investment.

D. None of the above

20. Which of the following statements about NPV and IRR is least accurate? *

4 points

A. The IRR is the discount rate that equates the present value of the cash inflows with the present value of outflows.

B. For mutually exclusive projects, if the NPV method and the IRR method give conflicting rankings, the analyst should use the IRRs to select the project.

C. The NPV method assumes that cash flows will be reinvested at the cost of capital, while IRR rankings implicitly assume that cash flows are reinvested at the IRR.

D. The IRR can be positive even if the NPV is negative.

E. None of the above