1. There is sometimes a ranking problem among NPV and IRR when selecting among m

Question

1.

There is sometimes a ranking problem among NPV and IRR when selecting among mutually exclusive investments. This ranking problem only occurs when

Select one:

a. the NPV is greater than the crossover point.

b. the NPV is less than the crossover point.

c. the cost of capital is to the right of the crossover point.

d. the cost of capital is to the left of the crossover point.

2.

The objective of ________ is to select the group of projects that provides the highest overall net present value and does not require more dollars than are budgeted.

Select one:

a. capital rationing

b. scenario analysis

c. certainty equivalents

d. sensitivity analysis

Explanation / Answer

1. A. the NPV is greater than the crossover point.

2. A.a. capital rationing

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