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Author Question: Two projects being considered by a firm are mutually exclusive and have the following projected cash ... (Read 30 times)

kaid0807

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Question 1

The underlying cause of ranking conflicts between the NPV and IRR methods is differing
◦ initial cost.
◦ costs of capital.
◦ cash flow timing.
◦ profitability indices.
◦ errors in calculating the discount rate.

Question 2

Two projects being considered by a firm are mutually exclusive and have the following projected cash flows:

YearProject AProject B
0-$100,000-$100,000
1$39,5000
2$39,5000
3$39,500$133,000
Which project(s) should be accepted?
◦ A, because it has a shorter payback period.
◦ B, because it has a higher IRR.
◦ Indifferent, because the projects have equal IRRs.
◦ Include both in the capital budget, since the sum of the cash inflows exceeds the initial investment in both cases.
◦ Choose neither, since their NPVs are negative.


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Marked as best answer by kaid0807 on Apr 25, 2021

mammy1697

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kaid0807

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Reply 2 on: Apr 25, 2021
Wow, this really help


fatboyy09

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Reply 3 on: Yesterday
YES! Correct, THANKS for helping me on my review

 

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