If You Were Evaluating Two Mutually Exclusive Projects for a Firm

question 102

True/False

If you were evaluating two mutually exclusive projects for a firm with a zero cost of capital, the payback method and NPV method would always lead to the same decision on which project to undertake.

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Definitions:

Required Discount Rate

The minimum expected rate of return on an investment, used in the discounting process of present value calculations.

Profitability Index

A financial tool used to determine the desirability of an investment or project by dividing the present value of future cash flows by the initial investment cost.

Rate Of Return

The gain or loss on an investment over a specified time period, expressed as a percentage of the investment's initial cost.

Profitability Index

A financial tool used to determine the desirability of an investment or project, calculated by dividing the present value of future cash flows by the initial investment cost.