Which of the following statements is CORRECT?
A) The NPV,IRR,MIRR,and discounted payback (using a payback requirement of 3 years or less)methods always lead to the same accept/reject decisions for independent projects.
B) For mutually exclusive projects with normal cash flows,the NPV and MIRR methods can never conflict,but their results could conflict with the discounted payback and the regular IRR methods.
C) Multiple IRRs can exist,but not multiple MIRRs.This is one reason some people favor the MIRR over the regular IRR.
D) If a firm uses the discounted payback method with a required payback of 4 years,then it will accept more projects than if it used a regular payback of 4 years.
E) The percentage difference between the MIRR and the IRR is equal to the project's WACC.

Question

Quizplus · Accepted Answer

Multiple IRRs can occur when a project has unconventional cash flows (i.e., cash flow signs change more than once), leading to more than one IRR that satisfies the equation where the net present value equals zero. However, the Modified Internal Rate of Return (MIRR) considers a single re-investment rate, leading to only one MIRR for a project, thus avoiding the multiple IRR problem. This characteristic makes MIRR a preferred measure for some analysts over the traditional IRR.

Which of the Following Statements Is CORRECT