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Question

Which of the following statement about NPV and IRR is not accurate?

A The IRR is the discount rate that equates the present value of cash inflows with the present value of cash outflows Correct Answer Incorrect Answer
B For mutually exclusive projects, if the NPV method and IRR method give conflicting rankings, the analyst should use one with the IRR method Correct Answer Incorrect Answer
C The NPV method assumes that cash flows will be re-invested at the cost of capital, while IRR assumes cash flows are re-invested at IRR Correct Answer Incorrect Answer
D None of the above are false Correct Answer Incorrect Answer
E All of the above statements are false Correct Answer Incorrect Answer

Solution

When there are conflicting results with NPV and IRR methods, an analyst should go by the one with NPV. All other statements are true

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