13. Multiple IRRs for a particular project can occur when there is (are): (Point

Question

13. Multiple IRRs for a particular project can occur when there is (are): (Points : 3)        large abandonment costs at the end of a project's life
       a major shutdown and rebuilding of a facility sometime during its life
       more than one sign change in the pattern of cash flows over a project's life.
       all of the above are correct

       cash flows after the payback period are ignored in the calculation
       payback ignores the time value of money
       payback fails to provide an objective decision-making criterion
       all of the above

Question 14. 14. According to the profitability index criterion, a project is acceptable if and only if its profitability index is (Points : 3)        greater than 1 plus the cost of capital
       greater than 0
       greater than or equal to 1
       greater than 1.1

Explanation / Answer

13 All the above are correct

multiple IRRs occur when there exists negative cash flows during the project life other than initial investment costs.

there should be even one negative cash flow to get more than 1 IRR.

.

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