Which of the Following Statements Is CORRECT

question 29

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:

Discharges

The release or dismissal from a duty, obligation, or liability.

Employer

An individual or organization that hires and pays people to work for them under agreed-upon terms.

Adequately

In a manner that is sufficient or satisfactory for a particular purpose.

Performance

In contract law, it refers to the act of doing what is required by a contract.