Quiz Ch 11 – Comparing Project Evaluation Methods and Outcomes
Fundamentals of Financial Management, Concise
Brigham and Houston
09th Edition
Which statement is ACCURATE concerning the two projects’ evaluation?
Which statement is ACCURATE concerning the two projects’ evaluation?
An equivalent WACC of 10% is applied to projects S and L with standard cash flows and matching risk levels. Notably, Project S outperforms L in terms of IRR. Identify the CORRECT statement:
Which statement is TRUE based on the provided information about Projects A and B?
Which statement is ACCURATE given the information about the projects’ evaluation?
Which statement is correct for equally risky projects with standard cash flows?
True or false: Normal Projects S and L exhibit equivalent NPVs at a zero discount rate. Yet, Project S’s cash flows arrive sooner than those of L. Consequently, it is evident that at any discount rate greater than zero, Project L will possess a higher NPV.
True or false: When the IRR of normal Project X exceeds the IRR of mutually exclusive Project Y, and Project X has a positive NPV, the firm should always opt for Project X over Y.
True or false: The IRR for Project X exceeds that of Project Y, with both IRRs being positive. Additionally, the NPV of X surpasses the NPV of Y at the cost of capital. In the case of mutually exclusive projects, choosing Project X and proceeding with the investment is the definite course of action, assuming data reliability. In other words, constructing NPV profiles that would advise against accepting Project X is unfeasible.
When evaluating mutually exclusive projects with IRRs exceeding the WACC, which statement is accurate regarding NPV and IRR conflicts?
Given specific project details, how do NPV and WACC variations affect the comparison between Projects A and B?