Which of the Following Statements Is Correct

question 58

Multiple Choice

Which of the following statements is correct?

• A)There can never be a conflict between NPV and IRR decisions if the decision is related to a normal, independent project, i.e., NPV will never indicate acceptance if IRR indicates rejection.
• B)To find the MIRR, we first compound CFs at the regular IRR to find the TV, and then we discount the TV at the required rate of return to find the PV.
• C)The NPV and IRR methods both assume that cash flows are reinvested at the required rate of return. However, the MIRR method assumes reinvestment at the MIRR itself.
• D)If you are choosing between two projects which have the same cost, and if their NPV profiles cross, then the project with the higher IRR probably has more of its cash flows coming in the later years.
• E)A change in the required rate of return would normally change both a project's NPV and its IRR.

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Definitions:

Finance/Accounting

The branch of business that deals with the management of money, including the processes of recording, classifying, and analyzing financial transactions.

Qualifying Sources

The process of evaluating and approving potential suppliers based on specific criteria to ensure they can meet an organization's requirements for quality, reliability, and service.

Post-Transaction Cost

Expenses incurred after a purchase, including handling complaints, returns, and warranty claims.

Total Cost of Ownership

The comprehensive assessment of the complete cost of acquisition and operation of a product or system over its useful life.