In which of the following scenarios will the IRR always provide you with the correct, wealth-maximizing decision?
A)Whenever you are evaluating an independent project--i.e., one that is not affected by the acceptance or rejection of another project.
B)When you are evaluating mutually exclusive projects that have different investment requirements.
C)When you are evaluating a single project that requires an initial cash outflow followed by positive cash flows in subsequent years.
D)The IRR will provide you with the correct, wealth-maximizing decision in all of the above situations.

Question

Quizplus · Accepted Answer

The IRR method is most reliable for a single project with an initial cash outflow followed by consistent positive cash inflows, as it assumes reinvestment at the IRR rate and does not require comparison with other projects' IRRs.

In Which of the Following Scenarios Will the IRR Always