Two Firms, Tangerine Inc

question 2

Multiple Choice

Two firms, Tangerine Inc. and Cyan Inc. analyzed the same capital budgeting project. Tangerine Inc. determined that the project's internal rate of return (IRR) is 9 percent. Cyan Inc. used the net present value (NPV) method to evaluate the project and determined that it is not acceptable. Given this information, which of the following statements is correct?

• A)The net present value of the project must be positive for both the firms.
• B)If it had computed the project's IRR, Cyan would have found the IRR to be less than 9 percent.
• C)Tangerine's chief financial officer (CFO) should use the traditional payback period method to evaluate the project.
• D)Tangerine Inc. should use a discount rate of more than 9 percent for capital budgeting analysis by the net present value (NPV) method.
• E)Cyan Inc.'s required rate of return is greater than 9 percent.

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Definitions:

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