Which of the Following Statements Is CORRECT

question 81

Multiple Choice

Which of the following statements is CORRECT?

• A) If two projects are mutually exclusive, then they are likely to have multiple IRRs.
• B) If a project is independent, then it cannot have multiple IRRs.
• C) Multiple IRRs can occur only if the signs of the cash flows change more than once.
• D) If a project has two IRRs, then the smaller one is the one that is most relevant, and it should be accepted and relied upon.
• E) For a project to have more than one IRR, then both IRRs must be greater than the cost of capital.

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Definitions:

Discount

The reduction applied to the face value of a bond or the lower than market price of an asset.

Par Value

The face value of a bond or stock as stated by the issuing company, which may differ from its market value.

Market Rate

The prevailing price or interest rate available in the marketplace for goods, services, or securities.

Coupon Rate

The coupon rate is the annual interest rate paid by a bond relative to its face value, expressed as a percentage.