Which of the following statements is FALSE?
A)The incremental IRR need not exist.
B)If a change in the timing of the cash flows does not affect the NPV,then the change in timing will not impact the IRR.
C)Although the incremental IRR rule can provide a reliable method for choosing among projects,it can be difficult to apply correctly.
D)When projects are mutually exclusive,it is not enough to determine which projects have positive NPVs.

Question

Quizplus · Accepted Answer

If a change in the timing of the cash flows does not affect the NPV, it may still impact the IRR, as the IRR is dependent on the timing and magnitude of the cash flows. Therefore, this statement is false. The other statements are true; the incremental IRR may not exist, the incremental IRR rule can be difficult to apply correctly, and when projects are mutually exclusive, it is important to compare the NPVs to determine the best option.

Which of the Following Statements Is FALSE