Answer to Question #193231 in Finance for rta

Question #193231

Which of the following statements is CORRECT?

Group of answer choices



One advantage of the NPV over the MIRR method is that NPV discounts cash flows whereas the MIRR is based on undiscounted cash flows.


Since cash flows under the IRR and MIRR are both discounted at the same rate (the WACC), these two methods always rank mutually exclusive projects in the same order.


One advantage of the NPV over the IRR is that NPV takes account of cash flows over a project's full life whereas IRR does not.


One advantage of the NPV over the IRR is that NPV assumes that cash flows will be reinvested at the WACC, whereas IRR assumes that cash flows are reinvested at the IRR. The NPV assumption is generally more appropriate.


One advantage of the NPV over the MIRR method is that NPV takes account of cash flows over a project's full life whereas MIRR does not.


1
Expert's answer
2021-05-14T10:52:05-0400

MIRR improves on IRR by assuming that positive cash flows are reinvested at the firm's cost of capital.

So, the correct answer is 4.


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