Which of the following statements is CORRECT?
A) If two projects are mutually exclusive, then they are likely to have multiple IRRs.
B) If a project is independent, then it cannot have multiple IRRs.
C) Multiple IRRs can occur only if the signs of the cash flows change more than once.
D) If a project has two IRRs, then the smaller one is the one that is most relevant, and it should be accepted and relied upon.
E) For a project to have more than one IRR, then both IRRs must be greater than the WACC.

Question

Quizplus · Accepted Answer

Multiple IRRs can occur only if the signs of the cash flows change more than once. Mutually exclusive projects may or may not have multiple IRRs, and the relevance of each IRR should be evaluated on a case-by-case basis. Projects can have multiple IRRs regardless of their independence, and neither IRR needs to be greater than the WACC for multiple IRRs to occur.

Which of the Following Statements Is CORRECT