Which of the Following Statements Is CORRECT

question 78

Multiple Choice

Which of the following statements is CORRECT?

• A) One advantage of the NPV over the IRR is that NPV assumes that cash flows will be reinvested at the WACC, whereas IRR assumes that cash flows are reinvested at the IRR. The NPV assumption is generally more appropriate.
• B) One advantage of the NPV over the MIRR method is that NPV takes account of cash flows over a project's full life whereas MIRR does not.
• C) One advantage of the NPV over the MIRR method is that NPV discounts cash flows whereas the MIRR is based on undiscounted cash flows.
• D) Since cash flows under the IRR and MIRR are both discounted at the same rate (the WACC), these two methods always rank mutually exclusive projects in the same order.
• E) One advantage of the NPV over the IRR is that NPV takes account of cash flows over a project's full life whereas IRR does not.

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Definitions:

Seasonal Dating

An arrangement that allows buyers to make payments at a later date, often used to accommodate seasonal fluctuations in sales or production.

Consignment Goods

Products held by a seller, but still owned by the supplier until they are sold to a consumer.

Open Charge Account

A credit account that allows the holder to make purchases and pay for them at a later date without a predefined payment schedule.

Installment Account

A credit account where the borrower repays the principal and interest over a set period through scheduled payments.