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All projects (A to G) are 7-year projects. NPV = Net present value. IRR = internal...

All projects (A to G) are 7-year projects. NPV = Net present value. IRR = internal rate of return. MIRR = modified internal rate of return. PI = profitability index.

Criteria:    Project_A     Project_B     Project_C     Project_D     Project_E     Project_F     Project_G
NPV=    $137,083    $31,290    $6,016    $7,647    ($584)    $12,521    $9,214
IRR=    31.80%    48.34%    12.03%    11.30%    9.94%    26.79%    37.87%
MIRR=    18.52%    23.52%    10.62%    10.59%    9.97%    23.53%    20.76%

The discounting rate (r) is 10%. Which of the following 10 statements are false/incorrect (there are several, select all that apply). Consider each statement on its own separate from the others listed:

If all projects are mutually exclusive, under the NPV rule projects A, B, C, D, F and G should be taken
  

If all projects are mutually exclusive, under the IRR rule only project B should be taken
  

If all projects are independent, under the PI rule, all projects should be taken
  

If all projects are independent, under the NPV rule, projects A, B, C, D, F, and G should be taken
  

If projects A & B are mutually exclusive, projects C and D are also mutually exclusive and projects F and G are also mutually exclusive (all others are independent), under the IRR rule projects B, C, and G should be undertaken
  

If only projects E and F are mutually exclusive, under the NPV rule only project A should be taken
  

If projects A, B and C are mutually exclusive, projects C and D are also mutually exclusive and (all others are independent), under the NPV rule projects A, D, and F should be undertaken
  

If all projects are mutually exclusive, under the NPV rule only project A should be taken
  

If projects A, B and C are mutually exclusive (all others are independent), under the PI rule projects B, D, F and G should be undertaken
  

If projects A & B are mutually exclusive, projects C and D are also mutually exclusive and projects F and G are also mutually exclusive (all others are independent), under the MIRR rule projects B, C, and F should be undertaken

PI=    1.69    2.25    1.040    1.038    0.999    2.25    1.92

The discounting rate (r) is 10%. Which of the following 10 statements are false/incorrect (there are several, select all that apply). Consider each statement on its own separate from the others listed:

Solutions

Expert Solution

Higher the NPV, MIRR, IRR better the project

We accept the project of:

NPV if greater than 0

IRR if greater than discount rate

MIRR if greater than discount rate

PI if greater than 1

If all projects are mutually exclusive, under the NPV rule projects A, B, C, D, F and G should be taken
True

If all projects are mutually exclusive, under the IRR rule only project B should be taken
True

If all projects are independent, under the PI rule, all projects should be taken

False, Project E won't be taken

If all projects are independent, under the NPV rule, projects A, B, C, D, F, and G should be taken
True

If projects A & B are mutually exclusive, projects C and D are also mutually exclusive and projects F and G are also mutually exclusive (all others are independent), under the IRR rule projects B, C, and G should be undertaken
True

If only projects E and F are mutually exclusive, under the NPV rule only project A should be taken
Note: Please confirm if the question is correct

If projects A, B and C are mutually exclusive, projects C and D are also mutually exclusive and (all others are independent), under the NPV rule projects A, D, and F should be undertaken
True

If all projects are mutually exclusive, under the NPV rule only project A should be taken
True

If projects A, B and C are mutually exclusive (all others are independent), under the PI rule projects B, D, F and G should be undertaken
True

If projects A & B are mutually exclusive, projects C and D are also mutually exclusive and projects F and G are also mutually exclusive (all others are independent), under the MIRR rule projects B, C, and F should be undertaken
True

jeff jeffy answered 1 year ago
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