Which One of the Following Is True for the Internal

question 111

Multiple Choice

Which one of the following is true for the internal rate of return (IRR) method?

• A) It assumes cash proceeds during the life of a project can be reinvested to earn the same rate of return as the weighted-average cost of capital.
• B) Depending on the pattern of after-tax cash flows, multiple IRRs for a given proposed investment are possible.
• C) IRRs of multiple projects are additive (that is, can be added together).
• D) It can be used to make optimal decisions regarding mutually exclusive investment projects.
• E) It makes it easy to incorporate multiple costs of capital.

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