e) From the fact that a particular investment project has a negative NPV we can infer...

e) From the fact that a particular investment project has a negative NPV we can infer that the IRR is larger than the interest rate. True or False
f) An investor is always willing to pay a positive amount for the option to delay an investment project to observe the realization of an uncertain variable True or False

Expert Solution

E. When the NPV is negative it means the present worth of cost is greater than the present worth of benefit. Generally, the cost incurs initially and benefit incurs in future date. Thus, we need to lower the discount rate so that the present worth of benefit is high. Hence, the IRR will be less.

False.

F. Investors wish to earn a higher return and in order to earn higher return they will be ready to pay a positive amount to observe the uncertain variable.

True.

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Rahul Sunny answered 2 years ago

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