A) Project D probably has a higher IRR.
B) Project D is probably larger in scale than Project C.
C) Project C probably has a faster payback.
D) Project C probably has a higher IRR.
E) The crossover rate between the two projects is below 12%.
G) B) and E)
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B) False
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A) You should recommend that the project be rejected because its NPV is negative and its IRR is less than the WACC.
B) You should recommend that the project be rejected because, although its NPV is positive, it has an IRR that is less than the WACC.
C) You should recommend that the project be accepted because (1) its NPV is positive and (2) although it has two IRRs, in this case it would be better to focus on the MIRR, which exceeds the WACC. You should explain this to the president and tell him that the firm's value will increase if the project is accepted.
D) You should recommend that the project be rejected. Although its NPV is positive it has two IRRs, one of which is less than the WACC, which indicates that the firm's value will decline if the project is accepted.
F) B) and D)
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A) The MIRR and NPV decision criteria can never conflict.
B) The IRR method can never be subject to the multiple IRR problem, while the MIRR method can be.
C) One reason some people prefer the MIRR to the regular IRR is that the MIRR is based on a generally more reasonable reinvestment rate assumption.
D) The higher the WACC, the shorter the discounted payback period.
E) The MIRR method assumes that cash flows are reinvested at the crossover rate.
G) C) and E)
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