Which of the Following Statements Is CORRECT

question 24

Multiple Choice

Which of the following statements is CORRECT?

• A) One advantage of the NPV over the IRR is that NPV takes account of cash flows over a project's full life whereas IRR does not.
• B) One advantage of the NPV over the IRR is that NPV assumes that cash flows will be reinvested at the WACC,whereas IRR assumes that cash flows are reinvested at the IRR.The NPV assumption is generally more appropriate.
• C) One advantage of the NPV over the MIRR method is that NPV takes account of cash flows over a project's full life whereas MIRR does not.
• D) One advantage of the NPV over the MIRR method is that NPV discounts cash flows whereas the MIRR is based on undiscounted cash flows.
• E) Since cash flows under the IRR and MIRR are both discounted at the same rate (the WACC),these two methods always rank mutually exclusive projects in the same order.

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Definitions:

Current Assets

Assets that are expected to be converted into cash, sold, or consumed within one year or within the operating cycle of a business, whichever is longer.

Net Sales

The net sales of a company, which are calculated by deducting returns, allowances for damaged or missing items, and discounts from total sales.

Credit Sale

A transaction where goods or services are provided to a customer with an agreement to pay at a later date.

Gross Profit

The difference between revenue and the cost of goods sold, representing the profit a company makes after deducting the costs associated with making and selling its products or services.