Reference no: EM132632761

Problem 1: Which of the following describes an advantage the internal rate of return has over net present value for capital budgeting purposes?

Group of answer choices

Option 1: All of these answers.

Option 2: The IRR method recognizes the time value of money.

Option 3: The IRR method is clear an easy to understand.

Option 4: Internal rate of return is an indicator of the efficiency, quality or yield of an investment.

Problem 2: Which of the following is an advantage of using the NPV method to evaluate different projects?

Group of answer choices

Option 1: It allows for easy comparisons of potential investments.

Option 2: NPV converts future revenue to current dollars, allowing the company to quantify a project's value.

Option 3: NPV can be customized to reflect the financial concerns and demands of the company.

Option 4: All of these answers.

Problem 3: Which of the following reasons is a reason why a higher discount rate generally means a lower NPV?

Group of answer choices

Option 1: A higher discount rate emphasizes earlier cash flows, which is when the expenses are incurred.

Option 2: Most projects do not pay off until years later, and those cash flows are highly discounted.

Option 3: When the discount rate is large, there are larger differences between PV and FV for each cash flow.

Option 4: All of these answers.