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Which one of the following is False when it comes to IRR? Multiple Choice It can...

Which one of the following is False when it comes to IRR?

Multiple Choice

  • It can be intuitively appealing because it presents its results as a percentage rather than a dollar amount

  • It is not as reliable as NPV when looking at mutually exclusive projects

  • It will always yield more than 1 result when NPV is negative

  • It will always agree with NPV for projects where all cash flows beyond Year 0 are positive as long as the project is evaluated in isolation from other potential projects (i.e. non-mutually exclusive)

  • The actual IRR calculation (not the decision-making criterion) does not take into account the required rate of return of the project

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Answer #1

It will always agree with NPV for projects where all cash flows beyond Year 0 are positive as long as the project is evaluated in isolation from other potential projects (i.e. non-mutually exclusive)

The actual IRR calculation (not the decision-making criterion) does not take into account the required rate of return of the project

It is not as reliable as NPV when looking at mutually exclusive projects

These statements are correct. If cash flows from the project will be non-conventional, then there will be multiple IRR for the project.

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