What is the decision rule in the case of sign changes that produce multiple IRRs for a project?
A)select the lowest IRR to be conservative.
B)select the highest IRR to maximize the benefits.
C)any or all of the IRRs are justified to use.
D)evaluate the project according to NPV.

Question

Quizplus · Accepted Answer

In the case of sign changes that produce multiple IRRs for a project, the decision rule is to evaluate the project according to net present value (NPV) instead of relying on IRR. This is because NPV takes into account the time value of money and provides a clearer representation of the project's profitability. It also avoids the potential ambiguity and confusion that can arise from using multiple IRRs to make investment decisions. Therefore, the best choice is Option D, evaluating the project according to NPV.

What Is the Decision Rule in the Case of Sign