Two Firms-Tangerine Inc

Two firms-Tangerine Inc. and Cyan Inc. analyze the same project for capital budgeting decision. Tangerine Inc. determines that the project's internal rate of return (IRR) is 9 percent. Cyan Inc. uses the net present value (NPV) method and determines that the project is unacceptable. Given this information, which of the following statements is correct?

A) The net present value of the project must be positive for both the firms.
B) Cyan Inc.'s internal rate of return (IRR) from the project is less than 9 percent.
C) Tangerine's CFO should use the traditional payback period method to evaluate the project.
D) Tangerine Inc. should use a discount rate of more than 9 percent for capital budgeting analysis by the net present value (NPV) method.
E) Cyan Inc.'s required rate of return is greater than 9 percent.

Correct Answer:

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