Npv and irr methods of capital budgeting

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Reference no: EM132014539

1. With the improvement in the technology and understanding of discounting techniques, both NPV and IRR methods of capital budgeting became more popular because _____.

A. these techniques provide correct decisions with respect to the maximization of the initial capital investment

B. these techniques provide correct decisions with respect to value maximization

C. these techniques provide correct decisions with respect to payback period minimization

D. these techniques provide correct decisions with respect to the maximization of the required rate of return

E. these techniques provide correct decisions with respect to the minimization of the number of IRRs for every project

2. Which of the following is a difference between an on-the-run and an off-the-run issue? An on-the-run issue:

A) Is the most recently issued security of that type

B) Has a shorter maturity than an off-the-run issue

C) Is publicly traded whereas an off-the-run issue is not

3. What is the internal rate of return for a project that is expected to cost 7,440 dollars today; produce a cash flow of 21,492.81 dollars in 8 years; and have a net present value of 1,819.35 dollars? Answer as a rate in decimal format so that 12.34% would be entered as .1234 and 0.98% would be entered as .0098.

Reference no: EM132014539

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