Projects T and Q are mutually-exclusive investment alternatives, Each project requires a net investment of...
60.1K
Verified Solution
Link Copied!
Question
Finance
Projects T and Q are mutually-exclusive investment alternatives, Each project requires a net investment of $20,000, followed by a series of positive net cash flows. Both projects have a useful life equal to 10 years. Project T has an NPV of $36,000 at a 0% discount rate, while project Q has an NPV of $30,000 at 0%. Furthermore, at a discount rate of 15 percent, the two projects have identical positive NPVs. Given this, which of the following statements is incorrect?
Project Q has higher a IRR than Project T.
If the cost of capital is greater than the IRR of Project T, reject both projects.
If the cost of capital is 10%, select Project Q.
There are three circumstances that can cause project evaluation technique conflict. Even though the net cash flow stream is not given, the project evaluation technique conflict in this problem must be caused by differences in the magnitude of the cash flows, or cash flow timing differences.
The slope of Project Q's NPV profile is steeper than the slope of Project T's NPV profile.
Answer & Explanation
Solved by verified expert
Get Answers to Unlimited Questions
Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!
Membership Benefits:
Unlimited Question Access with detailed Answers
Zin AI - 3 Million Words
10 Dall-E 3 Images
20 Plot Generations
Conversation with Dialogue Memory
No Ads, Ever!
Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!
