quiz 10

which of the following statements is FALSE a - In general, the IRR rule works for a stand-alone project if all of the project's positive cash flows precede its negative cash flows. b-The payback rule is primarily used because of its simplicity. c-No investment rule that ignores the set of alternative investment alternatives can be optimal. d -There is no easy fix for the IRR rule when there are multiple IRRs.

a

which of the following statements is FALSE a-If there is a fixed supply of a resource available, you should rank projects by the profitability index, selecting the project with the lowest profitability index first and working your way down the list until the resource is consumed. b - Practitioners often use the profitability index to identify the optimal combination of projects when there is a fixed supply of resources. c - The profitability index is calculated as the NPV divided by the resources consumed by the project. d- If there is a fixed supply of resources available, so that you cannot undertake all possible opportunities, then simply picking the highest NPV opportunity might not lead to the best decision.

a

which of the following statements is FALSE a - When projects are mutually exclusive, it is not enough to determine which projects have positive NPVs. b - Correct If a change in the timing of the cash flows does not affect the NPV, then the change in timing will not impact the IRR. c - Although the incremental IRR rule can provide a reliable method for choosing among projects, it can be difficult to apply correctly. d- The incremental IRR need not exist.

b

which of the following statements is FALSE a- If the payback period is less than a pre-specified length of time, you accept the project. b- The internal rate of return (IRR) investment rule is based upon the notion that if the return on other alternatives is greater than the return on the investment opportunity, you should undertake the investment opportunity. c -It is possible that there is no discount rate that will set the NPV equal to zero. d - It is possible that an IRR does not exist for an investment opportunity.

b

You are trying to decide between three mutually exclusive investment opportunities. The most appropriate tool for identifying the correct decision is: a- incremental IRR b-profitability indec c-NPV d-IRR

c