Which of the following statements is correct?
A)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.
B)The discounted payback method eliminates all of the problems associated with the payback method.
C)When evaluating independent projects, the NPV and IRR methods often yield conflicting results regarding a project's acceptability.
D)To find the MIRR, we discount the TV at the IRR.

Question

Quizplus · Accepted Answer

The statement accurately describes one advantage of the IRR method, which is that it provides a rate of return estimate rather than just a dollar amount like the NPV method. Option B is incorrect because discounted payback may still have some of the same problems as regular payback, such as not accounting for cash flows beyond the payback period. Option C is also incorrect because the NPV and IRR methods should not conflict when evaluating independent projects. Option D is incorrect because the MIRR calculation involves reinvesting cash flows at the required rate of return, not the IRR.

Which of the Following Statements Is Correct