Consider two mutually exclusive projects E and S. Both projects have the same profitability index of 1.2 (PIE = PIS = 1.2). The initial investment of Project E is I0,E = -$367,000, and the initial investment of Project S is I0,S = -$265,000. Which of the following statements is true?Question 7AnswerWe are unable to make an investment decision based on the information provided.cross outThe payback period of project E is 1.2 years.cross outThe NPV of project S is greater than the NPV of project E.cross outThe NPV of project E is greater than the NPV of project S.cross outThe NPVs of project E and S are equal.

Multiple Choice QuestionA company needs to choose between two investment opportunities. Project 1 has a cost of $500,000 and expected NPV of cash flows of $450,000. Project 2 has a cost of $800,000 and expected NPV of cash flows of $750,000. Using profitability index as the evaluation method, the company should choose:Multiple choice question.either project. Both are acceptable because the difference between cost and NPV is $50,000 for bothProject 2 because it has a higher NPVProject 1 because it has a higher indexProject 2 because it has a higher index

Which of the following statements is FALSE?Group of answer choicesProblems can arise using the IRR method when the mutually exclusive investments have differences in scale.Picking one project over another simply because it has a larger IRR can lead to mistakes.The profitability index measures the value created in terms of PV(Cash Flow) per unit of resource consumed.The profitability index alone can be easily adapted for determining the correct investment decisions when multiple resource constraints exist.

Multiple Choice QuestionA company is considering two projects. Project 1 has an initial investment of $60,000 and expected cash inflows of $20,000 each year for 5 years. Project 2 has an initial investment of $80,000 and expected cash inflows of $20,000 each year for 10 years. Using the payback period as the evaluation method, which investment should be chosen by management?Multiple choice question.Project 2 with total cash inflows of $200,000Project 1 with payback period of 3 yearsProject 2 with payback period of 4 yearsProject 1 with total cash inflows of $100,000

You make two investments as follows:Investment of $100 that yields $130 after three years,Investment of $100 that yields $140 after four years,Which of the following statements is true?2 MarksThe investment with less number of resources is more preferableShort term investments are always preferableThe investment with higher Opportunity cost is preferableThe investment with higher NPV is more preferable

You have two mutually exclusive projects. Both projects require initial investment of $20 million. Project 1 generated $4 million per year in perpetuity.Project 2 generated $3 million at the end of the first year and its revenue will grow 3% per year thereafter.The cash flows of both projects start at the end of the first year. <a> IRR<b> NPV, assume the cost of capital is 6%