10. Which of the following methods of a) profitability index and internal rate o

Question

10. Which of the following methods of a) profitability index and internal rate of return b) net present value and profitability index c) net present value and internal rate of return d) regular payback period and discounted payback period project analysis are biased towards short-term projects? are y and use only incremental cash flows in capital budgeting decisions y it is the change in a firm's overall future cash flows that matter. b) because they are the simplest to identify c) only when the stand-alone principle fails to hold. d) to accommodate unforeseen changes that might occur. 12. The (regular) internal rate of return (IRR) is defined as the ect will generate if the project is financed solely with internal funds solely with external funds a) rate of return a gene b) rate of return a project will generate if the project is financed c) discount rate which causes the net present value (NPV) of a project to equa d) discount rate which causes the profitability index (PI) for a project to equal zerdo zero 13. A project will have more than one internal rate of return (IRR) if a) the IRR is positive b) the IRR is negative c) the NPV is zero d) the cash flow pattern exhibits more than one sign change 14. Which of the following statements is false? a) If the required rate of return on the project is greater than the internal rate of return (IRR). the project should be accepted. b) If a project has a profitability index greater than one the project should be accepted. c) If the net present value (NPV) of a project is positive, the project should be accepted. d) If a project has a payback which is faster than the company requires the project should be accepted 15. A project has a required return of 15 percent and a five-year life. Which of the following is inconsistent with the other three? a) The discounted payback is five years. b) The profitability index (PI) is one. c) The net present value (NPV) is positive. d) The internal rate of return (IRR) is 15 percent

Explanation / Answer

Answering only 1st 4 MCQ's as per Chegg Policy.

10. Regular payback period and discounted payback period: they instantly tell in which the outflow would be recovered

11. Because ultimately it is the change in the firm's overall future cash flows that matter.

12. Discount rate which causes the NPV of a project equal to zero: IRR is the rate at which the NPV of the project is zero and IRR must be greater than the cost of capital.

13. the cash flow pattern exhibits more than one sign change: There exists multiple sign change in the signs of a projects life cycle.

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