The Reason Why the IRR Criterion Can Give Conflicting Signals

question 56

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:

Addiction

A psychological and physiological reliance on a substance or activity, characterized by compulsive engagement despite adverse consequences.

Dishabituation

The renewal or increase in responsiveness to a stimulus following a period of habituation or decreased responsiveness.

Reward

A stimulus or event that follows a behavior and increases the likelihood of that behavior being repeated.

Behavior Changes

modifications or adjustments in actions or reactions of an organism due to various factors like learning or adaptation.