On a Purely Theoretical Basis, NPV Is Preferred Over IRR

question 112

True/False

On a purely theoretical basis, NPV is preferred over IRR because NPV assumes a more conservative reinvestment rate and does not exhibit the mathematical problem of multiple IRRs that often occurs when IRRs are calculated for nonconventional cash flows.

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Definitions:

Specific Tax

Tax of a certain amount of money per unit sold.

Consumers

Individuals or groups who are the final users of products and services generated within an economy.

Specific Tax

A fixed amount of tax imposed on a product, service, or transaction, regardless of its price.

Competitive Market

A market structure characterized by a large number of buyers and sellers where no single participant can significantly influence the price of goods or services.