The net present value (NPV), profitability index (PI), and internal rate of return (IRR) methods are often

Question:

The (NPV), profitability index (PI), and (IRR) methods are often employed in project valuation. Identify each of the following statements as true or false, and explain your answers.
A. The IRR method can tend to understate the relative attractiveness of superior investment projects when the of cash flows is below the IRR.
B. A PI = 1 describes a project with an NPV = 0.
C. Selection solely according to the NPV criterion will tend to favor larger rather than smaller investment projects.
D. When NPV = 0, the IRR exceeds the cost of capital.
E. Use of the PI criterion is especially appropriate for larger firms with easy access to capital markets.

Net Present Value
What is NPV? The net present value is an important tool for capital budgeting decision to assess that an investment in a project is worthwhile or not? The net present value of a project is calculated before taking up the investment decision at... Internal Rate of Return
Internal Rate of Return of IRR is a capital budgeting tool that is used to assess the viability of an investment opportunity. IRR is the true rate of return that a project is capable of generating. It is a metric that tells you about the investment... Opportunity Cost
Opportunity cost is the profit lost when one alternative is selected over another. The Opportunity Cost refers to the expected returns from the second best alternative use of resources that are foregone due to the scarcity of resources such as land,...