Quiz Ch 11 – Relating IRR, WACC, and NPV for Equivalent Risk Projects
Fundamentals of Financial Management, Concise
Brigham and Houston
09th Edition
Which statement is correct for equally risky projects with standard cash flows?
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?
Which of the following statements is accurate?
Which statement is accurate?
Considering two companies, HD and LD, with identical assets, capital, EBIT, tax rates, and risk, but differing debt ratios where both have ROIC greater than rd(1 – T), which statement is correct?
Which of the following statements is accurate?