Why May the IRR Criterion Lead to an Incorrect Decision

question 52

Multiple Choice

Why may the IRR criterion lead to an incorrect decision when applied to mutually exclusive projects?

• A) The NPVs of mutually exclusive projects cross over at some discount rate.
• B) Cash flows cannot be discounted when considering mutually exclusive projects.
• C) Mutually exclusive projects produce negative IRR values.
• D)Mutually exclusive projects have multiple IRRs.

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Definitions:

John Watson

An American psychologist often cited as one of the founders of behaviorism, emphasizing the importance of observable behaviors over internal phenomena like thoughts and feelings.

Conscious Experience

The subjective awareness of one's thoughts, feelings, and environment, often contrasted with unconscious processes.

Wilhelm Wundt

Recognized as the father of experimental psychology, he established the first psychology laboratory at the University of Leipzig in Germany, marking the separation of psychology from philosophy.

Structuralism

A theory in psychology that considers the structure of the human mind and its perceptions as the main object of psychology.