Multiple choice, In general, the IRR comparison method and the PW comparison met
ID: 1174190 • Letter: M
Question
Multiple choice,
In general, the IRR comparison method and the PW comparison method
Question options:
produce the same decisions for independent projects but not for mutually exclusive projects
produce the same decisions for mutually exclusive projects but not for independent projects
produce different decisions for both independent projects and mutually exclusive projects
produce the same decisions for both independent projects and mutually exclusive projects
produce the same decisions for projects with unequal lives
Aproduce the same decisions for independent projects but not for mutually exclusive projects
Bproduce the same decisions for mutually exclusive projects but not for independent projects
Cproduce different decisions for both independent projects and mutually exclusive projects
Dproduce the same decisions for both independent projects and mutually exclusive projects
Eproduce the same decisions for projects with unequal lives
Explanation / Answer
Ans: produce the same decisions for both independent projects and mutually exclusive projects.
Explanation:
IRR is the interest rate at which PW of the cash flows is equal to zero. In case of IRR we are calculating the PW. Therefore, both IRR and PW comparison method produce the same decisions for both independent projects and mutually exclusive projects.
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