Reference no: EM131847829

1. Which of the following statement is correct:

1. The advantage of net present value over the internal rate of return is that the net present value takes into an account of cash flow over the projected life where the internal rate of return does not.

2. the advantage of net present value over the modified internal rate of return is that net present value of cash flow based on discount cash flow where as the modified internal rate of return based non-discount cash flow.

2. A company recently received an unexpected expansion opportunity. This opportunity has a payback period of 10 years, an IRR of 8.0% (compared to a cost of capital of 5.25%), and a NPV of $2 million. In isolation, the effect of the share price (100,000 shares outstanding) is most likely to:

a) Increase by 2.75%

b) Decrease by 2.75%

c) Increase by $20