Which capital investment evaluation technique is described by the following characteristics? (1) Easy to understand and communicate; (2) May result in multiple answers; (3) May lead to incorrect
Decisions when applied to mutually exclusive investments.
A) NPV.
B) IRR.
C) AAR.
D) Payback period.
E) Discounted payback.

Question

Quizplus · Accepted Answer

The IRR (Internal Rate of Return) is easy to understand and communicate, but it can result in multiple IRRs for non-conventional cash flows and may lead to incorrect decisions when comparing mutually exclusive projects.

Which Capital Investment Evaluation Technique Is Described by the Following