1. Which of the following is a correct capital budgeting decision rule?
a. Accept a project if the required rate of return is greater than the hurdle rate.
b. Accept a project if the hurdle rate is greater than the required rate of return.
c. none of the answers is correct
d. Accept a project if the hurdle rate is greater than the IRR.
e. Accept a project if the IRR is greater than the hurdle rate.
2. Which of the following statement is incorrect?
a. Whenever there is a ranking conflict between net present value and internal rate of return we generally suggest that the project with the lowest net present value be chosen.
b. Payback Period shows how many years take to recoup the initial investment.
c. The IRR is the discount rate that makes the present value of a project's cash flows equal its initial investment.
d. Most of the answers are correct.
e. One of the problem with the IRR method is that, in rare cases, a project may have more than one IRR, or no IRR.