Assume that both Projects A and B have normal cash flows, with one outflow followed by a series of inflows. Which of the following statements is CORRECT? a. If Project A's IRR exceeds its cost of capital, then the project A's NPV must be positive. b. The IRR calculation implicitly assumes that all cash flows are reinvested at the cost of capital. c. If Project A has a higher IRR than Project B, then Project A must have the lower NPV. d. If Project A has a higher IRR than Project B, then Project A must also have a higher NPV. e. If Project A has a lower IRR than Project B, then Project A must also have a lower NPV.
Assume that both Projects A and B have normal cash flows, with one outflow followed by a series of inflows. Which of the following statements is CORRECT? a. If Project A's IRR exceeds its cost of capital, then the project A's NPV must be positive. b. The IRR calculation implicitly assumes that all cash flows are reinvested at the cost of capital. c. If Project A has a higher IRR than Project B, then Project A must have the lower NPV. d. If Project A has a higher IRR than Project B, then Project A must also have a higher NPV. e. If Project A has a lower IRR than Project B, then Project A must also have a lower NPV.
Chapter11: Capital Budgeting Decisions
Section: Chapter Questions
Problem 16MC: When using the NPV method for a particular investment decision, if the present value of all cash...
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Question
Assume that both Projects A and B have normal cash flows, with one outflow followed by a series of inflows. Which of the following statements is CORRECT?
a. |
If Project A's |
|
b. |
The IRR calculation implicitly assumes that all cash flows are reinvested at the cost of capital. |
|
c. |
If Project A has a higher IRR than Project B, then Project A must have the lower NPV. |
|
d. |
If Project A has a higher IRR than Project B, then Project A must also have a higher NPV. |
|
e. |
If Project A has a lower IRR than Project B, then Project A must also have a lower NPV. |
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