Which of the following statements is true?

Question

Quizplus · Accepted Answer

Option A is false because IRR doesn't consider the scale of investment, which can be a disadvantage. Option B is false because the IRR only indicates whether the project's rate of return exceeds its cost of capital or not; it doesn't reflect the project's total value. Option C is false because an investment may have a low payback period but may later become less valuable than one with a longer payback period. Option E is false because both investment appraisal methods may provide different rankings; thus, it is advisable to employ both techniques. Option D is true because NPV is calculated using a higher opportunity cost than the IRR; if the IRR is less than the required rate of return, it reveals that the project's NPV is negative.

Which of the Following Statements Is True