1) Which of the following statements is true regarding the internal rate of return (IRR)?
a. If the project NPV > 0, then the IRR must be less than the project’s required return.
b. If you are comparing two mutually exclusive projects, always select the one with the higher IRR.
c. IRR and NPV always show the same preference when comparing two mutually exclusive projects
d. If the project has unconventional cash flows, then there may exist more than one IRR
e. None of the above.
2) Which of the following distinguishes scenario analysis from sensitivity analysis?
a. Scenario analysis only applies to new product development projects.
b. Sensitivity analysis only applies to new product development projects
c. Sensitivity analysis involves changing one project variable at a time while scenario analysis involves changing more than one project variable at the same time
d. Sensitivity analysis only applies when projects are mutually exclusive.
3) Which of the following statements is true?
a. The crossover rate is where the NPV of both projects is zero
b. The NPV Profile graphs NPV as a function of the discount rate.
c. Payback period favors longer projects
d. Profitability Index favors larger projects
e. None of the above are true.