Which of these statements about internal rate of return analysis is best?
A)If the IRR is less than the company's required rate of return,the project is worth funding.
B)Projects having lower IRR are generally superior to those having higher IRR.
C)IRR and NPV calculations always make the same investment recommendations.
D)If net outflows follow a period of net inflows,IRR may give conflicting results.

Question

Quizplus · Accepted Answer

If net outflows follow a period of net inflows, the project may have multiple IRRs or no real IRR, which can lead to conflicting results. Option A is incorrect because if the IRR is less than the required rate of return, the project is not worth funding. Option B is incorrect because projects with higher IRR are generally superior to those with lower IRR. Option C is incorrect because IRR and NPV may recommend different investments, especially when there are mutually exclusive projects.

Which of These Statements About Internal Rate of Return Analysis