midterm 2 - Time Remaining: 1. (TCO B) Which of the...

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Time Remaining: 1. (TCO B) Which of the following statements is most correct? (Points: 10) a. If a project with normal cash flows has an IRR which exceeds the cost of capital, then the project must have a positive NPV. b. If the IRR of Project A exceeds the IRR of Project B, then Project A must also have a higher NPV. c. The modified internal rate of return (MIRR), which always provides the higher return as compared to the Internal Rate of Return (IRR), should be used because of its optimistic view on the project's return. . d. Answers b and c are correct. e. None of the answers above is correct. If a project with normal cash flows has an IRR which exceeds the cost of capital, then the project must have a positive NPV. b. If the IRR of Project A exceeds the IRR of Project B, then Project A must also have a higher NPV. c. The modified internal rate of return (MIRR), which always provides the higher return as compared to the Internal Rate of Return (IRR), should be used because of its optimistic view on the project's return. . d. Answers b and c are correct. e. None of the answers above is correct. 2. (TCO B) The regular payback method has a number of disadvantages, some of which are listed below. Which of these items is not a disadvantage of this method? (Points: 10) Lack of an objective, market-determined benchmark for making decisions Ignores cash flows beyond the payback period. Does not directly account for the time value of money.
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This note was uploaded on 06/15/2011 for the course FI515 FI515 taught by Professor Fi515 during the Spring '10 term at Keller Graduate School of Management.

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midterm 2 - Time Remaining: 1. (TCO B) Which of the...

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