Which of the following statements is CORRECT?
A) The discounted payback method eliminates all of the problems associated with the payback method.
B) When evaluating independent projects, the NPV and IRR methods often yield conflicting results regarding a project's acceptability.
C) To find the MIRR, we discount the TV at the IRR.
D) A project's NPV profile must intersect the X-axis at the project's WACC.
E) The IRR method appeals to some managers because it gives an estimate of the rate of return on projects rather than a dollar amount, which the NPV method provides.

Question

Quizplus · Accepted Answer

The statement that the IRR method appeals to some managers because it gives an estimate of the rate of return on projects rather than a dollar amount, which the NPV method provides, is correct. The other statements are incorrect. The discounted payback method still suffers from the same problems as the regular payback method, the NPV and IRR methods should provide consistent results for independent projects, to find the MIRR we reinvest cash flows at the WACC, and a project's NPV profile can intersect the X-axis at any point.

Which of the Following Statements Is CORRECT