What is the difference between independent projects and dependent projects? a: Independent projects' cash flows are not affected by other projects' cash flows b: Dependent project cash flows are affected by others projects' cash flows c: Both of the above are true d: neither of the above is true
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What is the difference between independent projects and dependent projects?
a: Independent projects'
b: Dependent project cash flows are affected by others projects' cash flows
c: Both of the above are true
d: neither of the above is true
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Solved in 2 steps
- In which of the following cases is IRR unreliable? I. When looking at mutually exclusive projects II. For a project that has positive cash flow in Year 1, but negative cash flow in Year 2 Both Neither Only I Only IIWhich of the following statements is CORRECT? O Projects with "normal" cash flows can have two or more real IRRS. O Projects with "normal" cash flows must have two changes in the sign of the cash flows, e.g., from negative to positive to negative. If there are more than two sign changes, then the cash flow stream is "nonnormal." O The "multiple IRR problem" can arise if a project's cash flows are "normal." O Projects with "nonnormal" cash flows are almost never encountered in the real world. O Projects with "normal" cash flows can have only one real IRR.When you are evaluating independent projects and the projects' cash flows are conventional, the IRR and NPV methods will always agree. O No answer text provided. O No answer text provided. O False True
- Which of the following is true of independent projects with conventional cash flow? O Due to time disparity NPV and IRR might make conflicting recommendations. Due to time disparity Pl and IRR might make conflicting recommendations. NPV and IRR will make the same accepts or reject recommendation. Due to size disparity NPV and IRR might make conflicting recommendations.Explain why depreciation should not be included as a cost in a discounted cash flow (DCF) analysis of a project.Which of the following cash flows should not be considered when evaluating a project? Changes in working capital Shipping and installation costs Sunk costs Opportunity costs Externalities
- What is nonnormal cash flow projects?Which of the following statements is true with regard to cash flows resulting from financing costs? a. They should be included in the cash flow calculations. b. Financing cash flows cannot include dividend payments to stockholders and interest payments to bondholders. c. Financing costs are captured in the original investment of a project’s cash flows. d. If cash outflows associated with financing costs were deducted from the cash flows for a project, it would be double-counting the financing costs of the investment.Which of the following statements is CORRECT? Assume that the project being considered has normal cash flows, with one outflow followed by a series of inflows. a. If Project A has a higher IRR than Project B, then Project A must also have a higher NPV. b. If a project has normal cash flows and its IRR exceeds its cost of capital, then the project's NPV must be positive. c. The IRR calculation implicitly assumes that all cash flows are reinvested at the cost of capital. d. If Project A has a higher IRR than Project B, then Project A must have the lower NPV. e. The IRR calculation implicitly assumes that cash flows are withdrawn from the business rather than being reinvested in the business.
- Why should companies use a project’s free cash flows rather than accountingincome when determining a project’s NPV?Difficulties arise with the use of IRR for investment appraisal where: There is more than one sign change in the pattern of cashflows over a project’s life. The investment is mutually exclusive. There is a borrowing opportunity All of the aboveWhen evaluating capital projects, the decisions using the NPV method and the IRR method will disagree if: Group of answer choices the cash flow pattern is conventional. the projects are mutually exclusive. the cash flow pattern is unconventional and the projects are mutually exclusive. the projects are independent.