All projects re 7-year projectsNFN·Net present value-IRR·internal rate of return

Question

All projects re 7-year projectsNFN·Net present value-IRR·internal rate of return. MIRR-modifled Internal rate of return. PI- profnitability Index Project Project Project E $7,047 11.30% 10. 9% .038 $384) 9.94% NPV- 137,083 31.80% 18.52% 1.09 0,010 12.03% 10.62% $9,214 37.87% 20.7% 1.92 $31,290 12,521 20.79% 23.53% 48.34% MIRR 2.25 1.00 The discounting rate (r) Is 1096. Which of the following 10 statements are true (there are everal, Select all that are correct). Consider each statement on its own separate from the others listed: O tr a-projects are independent, under the NPV rule, projects A, B. C·D, F. and G should be taken If prajects A & B are mutually exclusive, projects C and D are also mutually exclusive and projects F and G are also mutually exclusive Call others are independent), under the MIRR rule prajects B, G and F should be undertaken If all projects are mutually exclusive, under the IRR nule only project B should be taken If only projects E and F are mutualily exclusive, under the NPV rule only praject A should be taken If al projects are mutually exclusive, under the NPV rule projects A, B, G D, Fand G should be taken projects A & B are mutually exclusive, projects C and D are also mutually exdusive nd projects F ard G are also mutually exclusive (all others are independent), under the IRR rule projects B, and G should be undertaken If projects A & B are mutualy exclusive, projects C and D are also mutually exdlusive and projects F and G are also mutually exclusive (all others are Independent), under the IRR rule projects A, D, and F should be undertaken If projects A & B are mutually exclusive, projects C and D are also mutually exdlusive and projects F and G are also mutually exclusive (all others are Independent), under the NPV rule projects A, D,and F should be undertaken It al projects are mutualy exclusive, under the NPV rule only project A should be taken If all projects are independent, under the NPV rule, all projects should be taken

Explanation / Answer

1 ANSWER-TRUE

NPV rules says that if NPV of any project is positive or zero it should be taken

2 ANSWER IS TRUE

Under MIRR rule project with higher MIRR is preferred.

3 ANSWER IS TRUE.

under IRR rule project with higher IRR should be taken

4 ANSWER IS FALSE

Sine project A, B, C, D, F G has positive NPV and independent it can be taken

5 ANSWER IS FALSE

If projects are mutually exclusive it means only one is to be selected upon them

6 ANSWER IS TRUE

Since IRR of B is higher than A, C is higher than D,G is higher than F so the statement is true.

7 ANSWER IS FALSE

Under IRR rule project with higher IRR should be taken

8 ANSWER IS TRUE

Under NPV rule, project with higher NPV should be considered

9 ANSWER IS TRUE

Under NPV rule, project with higher NPV should be considered

10 ANSWER IS FALSE

Since project E NPV is negative it shouldn’t be considered other than that all projects can be taken.

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