Which of the following is false regarding investment decision-making criterion?

ID: 2751958 • Letter: W

Question

a. The profitability index favors small projects and may lead to the wrong decision when desciding between mutually exclusive projects

b. The MIRR is an attempt to solve the problem of deciding between mutually exclusive projects using internal rate of return

c. You should pursure positive NPV projects.

d. IRR may lead to the wrong decision when deciding between mutually exclusive projects

e. Payback period requires an arbrituary cut-off for decision making

a. The profitability index favors small projects and may lead to the wrong decision when desciding between mutually exclusive projects.

False because profitability index decides based on Highest PI that is similar to NPV decision

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