Assume That You Are Comparing Two Mutually Exclusive Projects

question 77

Multiple Choice

Assume that you are comparing two mutually exclusive projects.Which of the following statements is most correct?

• A) The NPV and IRR rules will always lead to the same decision unless one or both of the projects are "non-conventional" in the sense of having only one change of sign in the cash flow stream,i.e. ,one or more initial cash outflows (the investment)followed by a series of cash inflows.
• B) If a conflict exists between the NPV and the IRR,the conflict can always be eliminated by dropping the IRR and replacing it with the payback period.
• C) There will be a meaningful (as opposed to irrelevant)conflict only if the projects' NPV profiles cross,and even then,only if the required rate of return is to the left of (or lower than)the discount rate at which the crossover occurs.
• D) Statements a,b,and c are all true.
• E) None of the above is a correct statement.

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Definitions:

Kidneys

Pair of bean-shaped organs located below the ribs on either side of the spine, responsible for filtering waste products and excess fluids from the blood to form urine.

Cortex

The outer portion of the kidney.

Kidney

A pair of bean-shaped organs in the vertebrate urinary system, responsible for filtering waste products from the blood and excreting them as urine.

Afferent Arteriole

A small artery that carries blood towards the glomeruli of the kidney, playing a key role in the regulation of blood pressure.