When considering two mutually exclusive projects, the firm should always select the project whose internal rate of return is the highest, provided the projects have the same initial cost. This statement is true regardless of whether the projects can be repeated or not.
Answer the following statement true (T) or false (F)
False
Rationale: Think about the following equally risky projects. The cost of capital is WACC = 10%
| 0 | 1 | 2 | 3 | 4 | 5 | 6 | |
| S | ?1,000 | 1,400 | |||||
| L | ?1,000 | 378.34 | 378.34 | 378.34 | 378.34 | 378.34 | 378.34 |
| IRRS = 40.0% | NPVS = $272.73 |
| IRRL = 30.0% | NPVL = $647.77 |
You might also like to view...
Home country laws relate to national security, antitrust, and ________
A) worker compensation B) worker benefits C) workplace safety D) ethical considerations
Which of the following statements is true regarding process costing?
A) Product costs are tracked and assigned to each job. B) Product costs are tracked to particular departments and then assigned evenly to the products that pass through each department. C) There should not be any beginning or ending work-in-process inventory. D) The units produced by a processing department should all be different in some way or another.
The ability to identify the key industry drivers of success is a fundamental concept that a nonfinancial manager should understand in order to:
A) better assess the current environment in which the firm operates. B) better assess future financing requirements. C) better understand the role of capital markets in raising long-term funds. D) better measure and create value for shareholders.
New customers may be turned over to account servicing salespeople referred to as
a. hunters b. merchandisers c. missionary salespeople d. pioneers e. farmers