Question

In: Finance

Which of the following statements concerning capital budgeting methods is/are correct? Group of answer choices a....

Which of the following statements concerning capital budgeting methods is/are correct?

Group of answer choices

a. The IRR and NPV methods may provide conflicting recommendations when choosing independent projects.

b. The discounted payback period method discounts accounting earnings at the cost of capital for risky projects.

c. The IRR and NPV methods may provide conflicting recommendations when choosing among mutually exclusive projects.

d. The pure payback method is the best method for evaluating large scale investment projects because it measures how fast the firm can recover the initial investment.

e. Both c and d are correct.

Solutions

Expert Solution

The internal rate of return and net present value methods will be providing with the conflicting results when we are choosing amongst mutually exclusive projects because there will be a risk related to the investment and there will also be difference into the stream of the Cash flows so it can be leading into different recommendations using net present value and internal rate of return method.

All the other statements are false, as payback period is worst method as discounting will be very high at later cash flows.

Correct answer will be option (C)

jeff jeffy answered 2 years ago
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