When Determining a Project's True Profitability, It Is Normally Better

question 13

Multiple Choice

When determining a project's true profitability, it is normally better to compute the project's modified internal rate of return (MIRR) rather than its internal rate of return (IRR) because the MIRR technique:

• A)considers only the cash flows after the project's payback period.
• B)has a decision rule that is easier to apply than the IRR decision rule.
• C)assumes that the project's cash flows are reinvested at the firm's required rate of return, whereas IRR assumes the cash flows are reinvested at the project's IRR.
• D)assumes that the project's cash flows are reinvested at the risk-free rate.
• E)assumes that the project's cash flows are discounted at its IRR.

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