Answer Happy

Which of the following statements is correct without limitations? Select one: A. All of these statements are correct. B. The IRR cannot be used to compare projects of different scale (size). C. The IRR cannot be used to check the sensitivity of the NPV to any estimation error in the cost of capital. D. The IRR is not affected by changes of the timing of cash flows. Which statement about the four investment cases (investment projects) shown below (A, B, C, and D) is correct without limitations? 300 -A-B C D 200 100 $0 NPV (S) 0% 5% 10% 15% 20% 25% 30% -100 --200 - 300 -400 Discount Rate Select one: A. For project C, we observe an upward-sloping NPV function. As the IRR and the NPV rule only lead to the same investment advice if the NPV function is a decreasing function of the discount rate, both investment rules do not lead to the same investment advice here. B. Although it is not possible to determine a single and unique discount rate that makes the NPV equal to zero for projects C and D, the IRR rule serves as a reliable investment decision tool for both projects. C. In all of the four cases, the NPV rule and the IRR rule will lead to the same investment advice. D. For all of the four investment projects, the NPV rule and the IRR rule will be in conflict.