All of the following capital budgeting tools are suitable for non-normal cash flows EXCEPT
A) MIRR.
B) profitability index.
C) IRR.
D) NPV.

Question

Quizplus · Accepted Answer

The Internal Rate of Return (IRR) method assumes normal cash flows (initial outlay followed by a series of positive cash inflows). It may not provide reliable results for projects with non-normal cash flows (e.g., projects with alternating positive and negative cash flows over their life), leading to multiple IRRs or no IRR at all. MIRR, profitability index, and NPV do not have this limitation and can handle non-normal cash flows more effectively.

All of the Following Capital Budgeting Tools Are Suitable for Non-Normal