Which of the following statements is correct?
A)For independent projects, the NPV, IRR, MIRR, and discounted payback (using a payback requirement of three years or less) methods always lead to the same accept/reject decisions for a given project.
B)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.
C)Multiple IRRs can exist, but not multiple MIRRs. This is one reason some people favour the MIRR over the regular IRR.
D)If a firm uses the discounted payback method with a required payback of four years, then it will accept more projects than if it used as its cutoff criterion a regular payback of four years.

Question

Quizplus · Accepted Answer

Multiple IRRs can occur when a project has unconventional cash flows (i.e., cash flow signs change more than once), but the MIRR method avoids this problem by assuming reinvestment at the project's cost of capital or the firm's reinvestment rate, leading to only one MIRR value. This makes MIRR a preferred method for some over the regular IRR, which can give multiple values in such cases.

Which of the Following Statements Is Correct