Which of the following statements is correct?
A)The MIRR and NPV decision criteria can never conflict.
B)The IRR method can never be subject to the multiple IRR problem, while the MIRR method can be.
C)One reason some people prefer the MIRR to the regular IRR is that the MIRR is based on what is generally a more reasonable assumption about the reinvestment rate than the regular IRR.
D)The higher the WACC, the shorter the discounted payback period.

Question

Quizplus · Accepted Answer

The MIRR method assumes that positive cash flows are reinvested at the cost of capital, which is a more reasonable assumption than the regular IRR method, which assumes that all cash flows are reinvested at the IRR. This can lead to conflicts when the project has non-conventional cash flows. The statement in option A is incorrect because conflicts can arise when projects have non-conventional cash flows, and the statement in option B is incorrect because both methods can be subject to the multiple IRR problem. The statement in option D is unrelated to the other criteria mentioned.

Which of the Following Statements Is Correct