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Flashcards in Exam 3 Deck (4)
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1

With mutually exclusive projects, will NPV always choose the most profitable?

Yes

2

2 things that cause a crossover? (Causes IRR and NPV to disagree)

-timing of cash flows
-project size

3

With independent projects, will NPV and IRR always agree?

With mutually exclusive projects, will NPV and IRR always agree?

Independent
-NPV and IRR always agree

Mutually Exclusive Projects
-IRR will disagree with NPV(is superior to IRR)
-when different timing of cash flows
-when different sizes

4

When will MIRR and NPV always agree regarding mutually exclusive projects?

When projects are SAME SIZE


***still agree if timing of cash flows are different because both use WACC as reinvestment rate