Which of the following is incorrect regarding the IRR statistic?
A)For independent projects, IRR will give the same accept/reject decision as NPV.
B)For the IRR statistic to give a different accept/reject decision from NPV, the cash flows must be non-normal and the projects must be mutually exclusive.
C)To solve for the IRR, one can simply solve the NPV formula for the rate that will make the NPV equal to zero.
D)None of these statements is incorrect.

Question

Quizplus · Accepted Answer

The statement "For the IRR statistic to give a different accept/reject decision from NPV, the cash flows must be non-normal and the projects must be mutually exclusive" is incorrect. In reality, the IRR and NPV may give different decisions even for normal cash flows and non-mutually exclusive projects. Therefore, option B is incorrect. Options A, C, and D are all correct statements.

Which of the Following Is Incorrect Regarding the IRR Statistic