Which of the Following Is Incorrect Regarding the IRR Statistic

question 25

Multiple Choice

Which of the following is incorrect regarding the IRR statistic?

• A) For independent projects, IRR will give the same accept/reject decision as NPV.
• B) For the IRR statistic to give a different accept/reject decision from NPV, the cash flows must be non-normal and the projects must be mutually exclusive.
• C) To solve for the IRR, one can simply solve the NPV formula for the rate that will make the NPV equal to zero.
• D) None of the statements are incorrect.

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Definitions:

Net Realizable Value

The estimated selling price in the ordinary course of business, minus the estimated costs of completion and the estimated costs necessary to make the sale.

Selling Price

The amount of money a buyer pays to purchase a product or service from a seller.

LIFO Cost Flow

An inventory valuation method, "Last In, First Out", where the last items placed in inventory are the first ones to be recorded as sold, affecting the company's inventory cost on financial statements.

Ending Inventory

The cumulative worth of a company's entire stock inventory at the conclusion of a financial accounting period.