The Reason Why the IRR Criterion Can Give Conflicting Signals

question 102

Multiple Choice

The reason why the IRR criterion can give conflicting signals with mutually exclusive projects is:

• A) the NPVs of these projects cross over at some discount rate.
• B) discounted cash flow is not considered with mutually exclusive projects.
• C) IRR performs better with accounting returns than with cash flows.
• D)mutually exclusive projects have multiple IRRs

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Definitions:

Informational Influence

Informational influence occurs when individuals conform to what they believe is the correct behavior, based on the information obtained from others, often in uncertain situations.

Normative Influence

The impact of the social norms and expectations of others on an individual's behavior, often leading to conformity.

Deindividuation

A psychological state where individuals lose self-awareness and a sense of individuality, often resulting in uninhibited or deviant behavior, usually within a group context.

Lost Anonymity

The situation in which an individual's identity becomes known after previously being unknown or unacknowledged.