2D2C MOLAR INC. IS EVALUATING THREE INDEPENDENT PROJECTS FOR THE EXPA...

340.

CSO: 2D2c

LOS: 2D2c

Molar Inc. is evaluating three independent projects for the expansion of different product

lines. The Finance Department has performed an extensive analysis of each project and

the chief financial officer has indicated that there is no capital rationing in effect. Which

of the following statements are correct?

I.

Reject any project with a payback period which is shorter than the

company standard.

II.

The project with the highest internal rate of return (IRR) exceeding the

hurdle rate should be selected and the others rejected.

III.

All projects with positive net present values should be selected.

IV.

Molar should reject any projects with negative IRRs.

a.

I, II and IV only.

b.

I, II, III and IV.

c.

II and III only.

d.

III and IV only.