Which of the following statements is CORRECT?
A) 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.
B) Multiple IRRs can exist, but not multiple MIRRs. This is one reason some people favor the MIRR over the regular IRR.
C) 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.
D) The percentage difference between the MIRR and the IRR is equal to the project's WACC.
E) 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.

Question

Quizplus · Accepted Answer

Multiple IRRs can exist when a project has non-normal cash flows (i.e., cash flow signs change more than once). In contrast, there can never be multiple MIRRs because the reinvestment rate assumption within MIRR only allows for one meaningful rate of return. This is one reason some prefer MIRR over IRR.

Which of the Following Statements Is CORRECT