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    Capital Budgeting Models

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    Which one of the following is TRUE?
    Answer
    IRR is superior to NPV for choosing between different projects.
    The NPV decision rule says to accept an investment if the NPV is negative.
    Payback ignores the project s cost.
    The IRR decision rule states that a project should be accepted if its IRR exceeds the required return.
    The discount rate that causes the net present value of a project to equal zero is called the market rate.

    "The market portfolio is currently generating a rate of return of 15%. You are analyzing portfolio XYZ for which you ve measured the required return to be 18%. Based on this information, which one of the following must be true? "
    Answer
    The beta of the market portfolio must be 2.0
    The beta of portfolio XYZ must be greater than 1.0
    Portfolio XYZ is not affected by swings in the market.
    The risk free rate of return must be 3%.

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    Solution Preview

    Which one of the following is TRUE?

    Answer
    The IRR decision rule states that a project should be accepted if its IRR exceeds the ...

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