In Comparing the Techniques of Net Present Value and Internal

question 8

Multiple Choice

In comparing the techniques of net present value and internal rate of return:
I. The NPV and IRR techniques will generate the same accept-reject decision provided the projects have conventional cash flows.
II. The differences between the underlying assumptions of NPV and IRR can cause them to rank projects differently.

• A) Only statement I is correct.
• B) Only statement II is correct.
• C) Both statements I and II are correct.
• D) Neither statement I nor II is correct.

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Definitions:

Dividends Declared

An announcement by a company's board of directors of a dividend payment to shareholders, indicating the amount and payment date.

Dividends Payable

A liability on the balance sheet representing the amount of dividends that a company owes to its shareholders but has not yet paid.

Stock Splits

An action by a company to divide its existing shares into multiple shares to boost the liquidity of the shares.

Retained Earnings

The portion of a company's profits that is held or retained and not paid out as dividends to shareholders, often used for reinvestment in the business or to pay off debt.