Ranking Conflicts Can Arise If One Relies on IRR Instead

question 47

Multiple Choice

Ranking conflicts can arise if one relies on IRR instead of NPV when:

• A) The first cash flow is negative and the remaining cash flows are positive.
• B) Projects are independent of one another.
• C) A project has more than one NPV.
• D) Projects are mutually exclusive.
• E) The profitability index is greater than one.

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Definitions:

Cyclohexane

A saturated hydrocarbon with the chemical formula C6H12, commonly used as a solvent or in the manufacture of other chemicals.

Methylcyclohexane

A saturated hydrocarbon with the formula C7H14, characterized by a methyl group attached to a cyclohexane ring, used as a solvent and in organic synthesis.

Cycloheptane

A cyclic alkane with the molecular formula C7H14, consisting of a ring of seven carbon atoms.

Phenol

An aromatic organic compound with the formula C6H5OH, used as an antiseptic and a raw material in the synthesis of plastics.