Question 15 (10 points) All projects are 7-year projects. NPV-Net present value.

Question

Question 15 (10 points) All projects are 7-year projects. NPV-Net present value. IRR -internal rate of return. MIRR modified internal rate of return. PI profitability index Project Project Project Project Project NPV= IRR= MIRR= PI= The discounting rate (r) is 10%. Which of the following 10 statements are true (there are several, select all that are correct). Consider each statement $6,016 12.03% 10.62% 1.040 Project E F ($584) 9.94% 9 S7% Project $12,521 26.79% 23.53% $7,647 11.30% 10.59% 1.038 $9,214 $137,08.3 31.80% 18.52% 1.69 $31,290 48.34% 23.52% 2.25 2076% 1.00 2.25 1.92 on its own separate from the others listed If all projects are independent, under the NPV rule, projects A, B, C, D, F, and G should be taken If projects A & B are mutually exclusive, projects C and D are also mutually exclusive and projects F and G are also mutually exclusive (all others are independent), under the IRR rule projects A, D, and F should be undertaken If projects A & B are mutually exclusive, projects C and D are also mutually exclusive and projects F and G are also mutually exclusive (all others are independent), under the MIRR rule projects B, C, and F should be undertaken

Explanation / Answer

NPV rule says that, projects with higher NPV should be selected. IRR rule says that, projects with higher IRR should be selected. MIRR rule says that, projects with higher MIRR should be selected. Considering above , the following statements are true 1) If all projects are independent , under NPV rule,projects A,B,C,D,F and G should be taken. 3) If projects A & B are mutually exclusive ,projects C & D are also mutually exclusive and projects F & G are also mutually exclusive (all other are independent) , under MIRR rule projects B,C and F should be chosan.

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