1) In IRR method the cash flows from a project are reinvested at the cost of capital. II) IRR is the rate at which present value of cash inflows is equal to the amount of initial investment. I) It is the rate at which the NPV of the project is positive. IV) IRR method is based on concept of time value of mone V) In IRR method the cash flows from a project are reinvested at the IRR itself. Which of the following statements are incorrect about Internal rate of return (IRR A III and I B. III and C. L III and I D. I onl y.V. VV.):y. D. I only.

1) In IRR method the cash flows from a project are reinvested at the cost of capital. II) IRR is the rate at which present value of cash inflows is equal to the amount of initial investment. I) It is the rate at which the NPV of the project is positive. IV) IRR method is based on concept of time value of mone V) In IRR method the cash flows from a project are reinvested at the IRR itself. Which of the following statements are incorrect about Internal rate of return (IRR A III and I B. III and C. L III and I D. I onl y.V. VV.):y. D. I only.

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter9: Capital Budgeting And Cash Flow Analysis

Section: Chapter Questions

Problem 5QTD

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I) In IRR method the cash flows from a project are reinvested at the cost of capital. II) IRR is the rate at which present value of cash inflows is equal to the amount of initial investment. III) It is the rate at which the NPV of the project is positive. IV) IRR method is based on concept of time value of money. V) In IRR method the cash flows from a project are reinvested at the IRR itself. Which of the following statements are incorrect about Internal rate of return (IRR): А. I, II and IV. В. Ш and V C. I, III and IV. D. I only.
I) In IRR method the cash flows from a project are reinvested at the cost of capital. 1) II) IRR is the rate at which present value of cash inflows is equal to the amount of initial investment. III) It is the rate at which the NPV of the project is positive. IV) IRR method is based on concept of time value of money. V) In IRR method the cash flows from a project are reinvested at the IRR itself. Which of the following statements are incorrect about Internal rate of return (IRR): A. I, III and IV. B. III and V C. I, III and IV. D. I only.
This method solves for the interest rate that equates the equivalent worth of a project's cash outflows (expenditures) to the equivalent worth of cash inflows (receipts or savings). O A. Payback Period O B. Profitability Index O C. Rate of Return O D. MARR
To calculate net present value of a project with normal cash flows, find the present value of the expected cash flows, and subtract A) retained earnings. B) the cost of the investment. C) the factor loading. D) the payback period.
In the payback method, depreciation is added back to net operating income when computing the annual net cash flow. True or False The internal rate of return is computed by finding the discount rate that equates the present value of a project's cash outflows with the present value of its cash inflows. True or False The internal rate of return method assumes that the cash flows generated by the project are immediately reinvested elsewhere at a rate of return that equals the company's cost of capital. True or False An increase in the expected salvage value at the end of a capital budgeting project will increase the internal rate of return for that project. True False The minimum required rate of return is the discount rate that makes the net present value of the project equal to zero. True False The production budget is typically prepared before the direct materials budget. True False The selling and administrative budget is typically prepared…
The internal rate of return method assumes that a project's cash flows are reinvested at the: Multiple Choice internal rate of return. simple rate of return. required rate of return. payback rate of return.
The Modified Internal Rate of Return (MIRR) is based on: O a Reinvestment rate, financing rate, and the number of periods Only the reinvestment rate of the project's cash flows Neither of the aforementioned variables Only the financing rate of the project's cash flows
The payback period is a non - discounted cash flow technique that measures: a. The time required to recover the initial investment b. The profitability of the project c. The net present value of the project d. The internal rate of return of the project
Cash flows that are directly associated with a project are called O sunk costs. terminal costs. incremental cash flows. current cash flows.
What refers to the interest rate at which the present work of the cash flow on a project is zero of the interest earned by an investment? Select one: a. Return of investment b. Yield c. Rate of return d. Economic return
A project's IRR: A) All of these answers are correct. B is the average rate of return necessary to pay back the project's capital providers. C is equal to the discounted cash flows divided by the number of cash flows if the cash flows are a perpetuity. D will change with the cost of capital.
State a method that translates a project's cash flows into an equivalent net present value?