NPV vs IRR: Investment Decision Making
5 Questions
0 Views

Choose a study mode

Play Quiz
Study Flashcards
Spaced Repetition
Chat to lesson

Podcast

Play an AI-generated podcast conversation about this lesson

Questions and Answers

Which approach tends to be more conservative?

  • IRR
  • Discounted payback period
  • NPV (correct)
  • Payback period

    • What is the primary difference between IRR and NPV assumptions?

  • The expected return on investment
  • The method of calculating the present value
  • The discount rate used
  • The reinvestment rate of cash inflows (correct)

    • Why do companies prefer larger cash inflows in the early years?

  • Due to the downstream uncertainty (correct)
  • Due to the high cost of capital in early years
  • Due to the high returns on investment in early years
  • Due to the low returns on investment in early years

    • When do early year cash inflows tend to have a lower cost of capital?

    <p>Compared to later year cash inflows</p> Signup and view all the answers

    What is the consequence of differences in the magnitude and timing of cash inflows?

    <p>Projects are ranked differently</p> Signup and view all the answers

    More Like This

    Business Finance Essentials Quiz
    12 questions

    Business Finance Essentials Quiz

    ComelyEinstein avatar
    ComelyEinstein
    Capital Budgeting Fundamentals
    6 questions

    Capital Budgeting Fundamentals

    LawAbidingReef5165 avatar
    LawAbidingReef5165
    Capital Budgeting Overview
    42 questions

    Capital Budgeting Overview

    AlluringMoldavite621 avatar
    AlluringMoldavite621
    Real Estate Investment Analysis
    17 questions

    Real Estate Investment Analysis

    MarvellousFeynman avatar
    MarvellousFeynman
    Use Quizgecko on...
    Browser
    Open
    Browser
    Browser