Which of the Following Statements Is Correct

question 67

Multiple Choice

Which of the following statements is correct?

• A)When dealing with independent projects, discounted payback (using a payback requirement of 3 or less years), NPV, IRR, and modified IRR always lead to the same accept/reject decisions for a given project.
• B)When dealing with mutually exclusive projects, the NPV and modified IRR methods always rank projects the same, but those rankings can conflict with rankings produced by the discounted payback and the regular IRR methods.
• C)Multiple rates of return are possible with the regular IRR method but not with the modified IRR method, and this fact is one reason given by the textbook for favoring MIRR (or modified IRR) over IRR.
• D)Statements a, b and c are all false.

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Definitions:

Firm-specific Variances

Variability in a company's stock price or financial performance that is attributable to internal factors unique to the company, rather than broader market influences.

Macroeconomic Factor

A Macroeconomic Factor is a condition or variable that impacts the economy at a broad scale, including inflation, unemployment, and economic growth rates.

Single-Index Structure

A model used in finance to describe the returns of a portfolio using a linear relationship between the return of the portfolio and the return of a market index.

Expected Returns

The anticipated average return on an investment, taking into account the probability of different outcomes, including both gains and losses.