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Questions and Answers
Which approach tends to be more conservative?
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?
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?
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?
When do early year cash inflows tend to have a lower cost of capital?
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What is the consequence of differences in the magnitude and timing of cash inflows?
What is the consequence of differences in the magnitude and timing of cash inflows?
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