Which of the following statements is correct?
A)The discounted payback is generally shorter than the regular payback.
B)Any type of project might have multiple rates of return if the IRR is sufficiently high.
C)The NPV and IRR methods can lead to conflicting and accept/reject decisions only if (1) mutually exclusive projects are being evaluated and (2) if the projects' NPV profiles cross at a rate less than the firm's cost of capital.
D)The NPV and IRR methods can lead to conflicting accept/reject decisions only if (1) mutually exclusive projects are being evaluated and (2) if the projects' NPV profiles cross at a rate greater than the firm's cost of capital.
E)None of the above is a correct statement.

Question

Quizplus · Accepted Answer

Statement A is not always true as it depends on the discount rate used. Statement B is false as a project can only have one IRR. Statement D is also false as the projects' NPV profiles crossing at a rate greater than the cost of capital would lead to the same decision for both methods. Statement C is correct as it outlines the specific circumstances in which the two methods may disagree.

Which of the Following Statements Is Correct