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 should be to evaluate the project according to NPV. NPV takes into account the time value of money and gives a better indication of the project's profitability. Additionally, NPV is not affected by multiple IRRs as it considers all cash flows and discounts them to the present value at a given rate. Therefore, choosing the project with the highest NPV is the best choice.

What Is the Decision Rule in the Case of Sign