The NPV and IRR Methods, When Used to Evaluate Two

question 37

True/False

The NPV and IRR methods, when used to evaluate two independent and equally risky projects, will lead to different accept/reject decisions and thus capital budgets if the projects' IRRs are greater than their cost of capital.

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Definitions:

Dividend Yield

Dividend yield is a financial ratio that shows how much a company pays out in dividends each year relative to its stock price.

Capital Gains Yield

The percentage increase in the market price of an asset over time, excluding dividends.

Annual Dividend

The total dividend payments issued to shareholders by a company in a year.

Risk Premium

The return in excess of the risk-free rate of return that an investment is expected to yield, compensating investors for taking on additional risk.