The Net Present Value (NPV) Is Preferred to the Internal

question 3

Multiple Choice

The net present value (NPV) is preferred to the internal rate of return (IRR) for capital budgeting decisions because:

• A) the internal rate of return (IRR) does not allow you to determine if the project is acceptable.
• B) the net present value (NPV) is the only method that allows you to determine which independent project is acceptable.
• C) the net present value (NPV) allows you to compare mutually exclusive projects.
• D) the internal rate of return (IRR) for a project is different for each firm.
• E) the net present value (NPV) contains information about a projects "safety margin" which is not inherent in the internal rate of return (IRR).

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