1. Which of the following statements is true about using the internal rate of return (IRR)?
a. You do not need to know the discount rate to compute the IRR.
b. A single project can have only one IRR.
c. Any investment opportunity where IRR is more than the opportunity cost of capital should be rejected.
d. IRR always agrees with the NPV rule.
2. Which of the following statements are true about the payback rule?
a. Projects whose cash flows are received later will more likely be accepted.
b. It will always agree with the IRR rule.
c. It is based on the notion that an opportunity that pays back the initial investment quickly is the best idea.
d. You need to know the discount rate to calculate it.
3. When will NPV and IRR give you the same answer?
a. When projects are mutually exclusive.
b. When dealing with conventional cash flows and only a single project.
c. When the discount rate is less than the crossover rate.
d. When cash flows are unconventional and the projects are mutually exclusive.
4. In what circumstance is the profitability index helpful?
a. When the capital budget is less than the total initial costs of all possible projects (regardless of NPV)
b. When the capital budget is less than the total initial costs of all positive NPV independent projects
c. When the capital budget is less than the NPV of all positive NPV independent projects
d. When there are multiple IRRs