Question 12 3 pts Capital Financial has an investment projec

Question 12 3 pts Capital Financial has an investment project that provides the following cash flows .10.000 (year O) +5.500 (year 1) . +7000 (year 2) .+8,000 (year 3) -6.500 (year 4) The CEO of Capital Financial advocates that the firm uses NPV to evaluate this project instead of IRR. Why is this a good idea in this instance? C. There are mutually exclusive projects D You need to flip the IRR rule in this case There could be multiple IRRs

Solution

THE ABOVE EXAMPLE IS ON NON-CONVENTIONAL CASH FLOWS

IF YOU SEE, THERE ARE 2 OUTFLOWS, SO THERE WILL BE MORE THAN ONE IRRs

SO IT WILL GIVE CONFLICTING RESULTS. SO BEST POLICY IS TO FOLLOW NPV METHOD

CORRECT ANSWER : THERE COULD BE MULTIPLE IRRs