The Net Present Value (NPV) Is Preferred to the Internal

question 3

Multiple Choice

The net present value (NPV) is preferred to the internal rate of return (IRR) for capital budgeting decisions because:

• A) the internal rate of return (IRR) does not allow you to determine if the project is acceptable.
• B) the net present value (NPV) is the only method that allows you to determine which independent project is acceptable.
• C) the net present value (NPV) allows you to compare mutually exclusive projects.
• D) the internal rate of return (IRR) for a project is different for each firm.
• E) the net present value (NPV) contains information about a projects "safety margin" which is not inherent in the internal rate of return (IRR).

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Definitions:

Reward Motivation

The drive to perform actions or engage in behaviors due to the anticipation of positive reinforcements or rewards.

Timeliness

The quality or habit of occurring, acting, or being done at the appropriate or planned time.

Availability

The state of being ready for use or accessible for a certain purpose or need.

Performance Contingency

A condition where the outcome or rewards depend on the level of performance achieved.