The NPV and IRR Methods,when Used to Evaluate Two Equally

question 7

True/False

The NPV and IRR methods,when used to evaluate two equally risky but mutually exclusive projects,will lead to different accept/reject decisions and thus capital budgets if the cost of capital at which the projects' NPV profiles cross is greater than the crossover rate.

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Definitions:

Signaling Effect

The signaling effect refers to the idea that actions by a company can provide information to investors about its future prospects.

Dividend Increase

An action by a company to raise the amount of money paid to its shareholders as dividends.

Residual Dividend Theory

A policy where dividends are based on earnings left over after all operating and expansion expenses are covered.

Capital Budgeting

The process of planning and evaluating expenditures on assets whose returns are expected to extend beyond one year.