II is not always true. A project may have a very high IRR, but the project may be a very small project, and its NPV may not be as high as that of other projects. Other factors must be considered besides the IRR.
II is not always true. A project may have a very high IRR, but the project may be a very small project, and its NPV may not be as high as that of other projects. Other factors must be considered besides the IRR.
I is true. If the payback period for a project is longer than the company standard for payback periods, a project should be rejected. II is not always true. A project may have a very high IRR, but the project may be a very small project, and its NPV may not be as high as that of other projects. Other factors must be considered besides the IRR. III is true. When two projects are mutually exclusive (i.e., the company can select one or the other but not both), the project with the higher NPV should be selected, because that will maximize the shareholders’ wealth. IV is not true. Selecting the project with the smaller initial investment does not take into consideration whether the project will benefit the company and its shareholders. The project with the smaller initial investment might have a negative NPV. The size of the initial investment is not a consideration in this case, because there is no capital rationing in effect.
II is not always true. A project may have a very high IRR, but the project may be a very small project, and its NPV may not be as high as that of other projects. Other factors must be considered besides the IRR. IV is not true. Selecting the project with the smaller initial investment does not take into consideration whether the project will benefit the company and its shareholders. The project with the smaller initial investment might have a negative NPV. The size of the initial investment is not a consideration in this case, because there is no capital rationing in effect.
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