Question

In: Finance

Which of the followings may lead to the wrong decision if IRR is used as the...

Which of the followings may lead to the wrong decision if IRR is used as the investment decision criteria?

When dealing with mutually exclusive projects.

IRR never leads to the wrong decision.

When dealing with independent projects with conventional cash flow pattern.

When dealing with small independent projects

When dealing with very large independent projects

Solutions

Expert Solution

When dealing with mutually exclusive projects.

When dealing with mutually exclusive projects, analysis based on IRR can lead to wrong decision. The project having gerater NPV should be accepted. When analysing mutually exclusive projects, the project having higher NPV can have a higher IRR. If we choose the project based on IRR , it can lead to wrong decision as teh project with lower NPV may be accepted.

jeff jeffy answered 2 years ago
Next > < Previous

Related Solutions

Which of the following situations can lead to the IRR rule giving the same decision as...
Which of the following situations can lead to the IRR rule giving the same decision as the NPV rule?
Under what circumstances will the IRR and NPV rules lead to the same decision (accept/reject)? When...
Under what circumstances will the IRR and NPV rules lead to the same decision (accept/reject)? When might they conflict? (It is important to explain your answers with details or demonstrate your understanding by applying examples.) please this answer should not be from text book.
The IRR decision rule can be reversed because A. the IRR is greater than 100% B....
The IRR decision rule can be reversed because A. the IRR is greater than 100% B. the NPV rule is not the same as the IRR C. instead of an investment project it is a financing project D. the IRR is based on a mutually exclusive investment
Which of the followings are an acceptable and which of thefollowings are not an acceptable...
Which of the followings are an acceptable and which of the followings are not an acceptable variable name? In case of unacceptable justify your answer, i.e., why not acceptable?M1_Name#_NameMy FriendnameWe_Are_All_Friends
Compare and contrast NPV and IRR. Out of the six capital budgeting decision models which would...
Compare and contrast NPV and IRR. Out of the six capital budgeting decision models which would you choose to measure a potential project and why?
It has been predicted that post covid-19 macroeconomic indicators may be discouraging, which may lead to...
It has been predicted that post covid-19 macroeconomic indicators may be discouraging, which may lead to worsening economic conditions. Ghana therefore, should prepare for the task ahead. Required: a) Identify the possible tasks ahead of government as implied in this case and discuss their impact on Ghanaians.    (b) propose practical measures necessary to mitigate such challenges   
It has been predicted that post covid-19 macroeconomic indicators may be discouraging, which may lead to...
It has been predicted that post covid-19 macroeconomic indicators may be discouraging, which may lead to worsening economic conditions. Ghana therefore, should prepare for the task ahead. Required: a) Identify the possible tasks ahead of government as implied in this case and discuss their impact on Ghanaians. b) Propose practical measures necessary to mitigate such challenges
It has been predicted that post covid-19 macroeconomic indicators may be discouraging, which may lead to...
It has been predicted that post covid-19 macroeconomic indicators may be discouraging, which may lead to worsening economic conditions. Ghana therefore, should prepare for the task ahead. Required: a) Identify the possible tasks ahead of government as implied in this case and discuss their impact on Ghanaians.                                                                                                b) Propose practical measures necessary to mitigate such challenges                     (NB: You may use diagrams where necessary)
It has been predicted that post covid-19 macroeconomic indicators may be discouraging, which may lead to...
It has been predicted that post covid-19 macroeconomic indicators may be discouraging, which may lead to worsening economic conditions. Ghana therefore, should prepare for the task ahead. Required: a) Identify the possible tasks ahead of government as implied in this case and discuss their impact on Ghanaians.    b) Propose practical measures necessary to mitigate such challenges
Write a balanced chemical equation for the followings (a) Solid lead (II) sulfide reacts the aqueous...
Write a balanced chemical equation for the followings (a) Solid lead (II) sulfide reacts the aqueous hyrobromic acid (HBr) to form solid lead(II) bromide and dihydrogen monosulfided gas. (b) sulfur dioxide gas reacts with oxygen gas to form sulfur trioxide gas (c ) aqueous potassium hydroxide with aqueous iron (III) chloride to form solid iron (III) hydroxide and aqueous potassium chloride
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT