Question
Under which of the scenarios, the investment decision
between mutually exclusive proposals will differ as per NPV and IRR method? A.Size of the two project is different B.Timing of cash-flows is different of the two projects C.The life of the two projects is different D.The purpose of the two projects is differentSolution
Mutually exclusive projects are those refer to a sect of projects out of which only one project can be selected for investment. • When the size of projects is different, the NPV and IRR method would give conflicting results as NPV being an absolute amount would give higher return for a higher size project while IRR being relative would give a lower % return for a larger size project • In case of difference in timing of cash inflows, the NPV and IRR give conflicting results due to reinvestment rate assumption. NPV assumes that intermediate cash inflows are reinvested at discount rate while IRR assumes that they are reinvested at the IRR rate itself. • Difference in the economic life of the projects also give contradictory results under NPV and IRR. • The purpose of the project is a subjective aspect and does not concern with NPV
The ratio of the present ages of Ginni and Binni is 7:4 respectively. Ginni is ‘n’ years older than Binni. If after 2 years, the ratio of the ages o...
The seller sold a total of 40 kg of rice bags, comprising Basmati Rice and Brown Rice. The cost price of Basmati rice is Rs.72/kg, and that of Brown ric...
A shopkeeper mixes two types of rice costing Rs 60 per kg and Rs 80 per kg in a ratio. He sells the mixture at Rs 85 per kg and gains a profit of 25%. I...
The jar P has a mixture of milk and cream in the ratio of 8:5, and the jar Q has a mixture of 60 liters of milk and cream in the ratio of 7:5. If the mi...
A luxury watch is originally priced at ₹15,000. During a seasonal sale, the watch is offered at a discount of 30%. After the discount, an additional 1...
(0.25) -1.5 = ?
‘A’ and ‘B’ can do a piece of work in 25 days and 30 days, respectively. If they started the work together and worked on it for 5 days, then fin...
In what ratio rice at 47 Rs/kg should be mixed with the rice at 28 Rs/kg so that selling mixture at Rs 45 per kg gives the profit of 25% if the quantity...
A shopkeeper marked his goods 30% above the cost price and earned a profit of Rs. 14 after selling it by giving a discount of 22%. Find the cost price o...
There are two buckets X and Y containing mixture of milk and water in which concentration of milk is (a-9)% and (a+15)%, respectively. They are mixed to...
Relevant for Exams:
