Version A 26. In which of the following cases might the net present value (NPV) and the intermnal rate of return (IRR) rules will lead to different decisions? I. when the project cash flows are conventional II. when the IRR is negative III. when an investment decision involved mutually exclusive choices A. I only B. III only C. I and II only D. I and IlI only E. II and III only 27. Net present value (NPV): A. is equal to the initial investment in a project. B. compares a project's cost to the present value of the projects benefits. C. is equal to zero when the discount rate used is less than the internal rate of return (IRR). D. is simplified by the fact that future cash flows are easy to estimate. E. requires the firm set an arbitrary cutoff point for determining whether an investment is acceptable or not. (The following information applies to the next three problems.) The following cash flows are estimated for two projects A and B: Year Project A Project B 0100 1 60 110 20 40 40 50 40 3 20 4 10 28. When is Project B more lucrative than project A? (That is, over what range of discount rates r does project B have higher NPV than project A? Hint:calculate the crossover rate.) (Choose the best answer.) A. For all values of r less than 7.25%. B. Project B is always more profitable than project A. C. Project A is always more profitable than project B. D. For all values of r less than 6.57%. E. For all values of greater than 6.57%