Which of the following statements is false? (a) 12. The net present value method

Question

Which of the following statements is false? (a) 12. The net present value method always indicates the project that maximizes the net present value of present and future cash flows. The internal rate of return method can rank projects differently from the net present value method if the alternative projects have uneven lives. The internal rate of return assumes that the reinvestment rate is equal to the indicated rate of return. The profitability index is superior to the internal rate of return on small projects. (b) (c) (d)

Explanation / Answer

All statements are correct except C.

IRR does not assume that the cash inflows will be reinvested. That is only shortcoming of IRR.

MIRR assumes that the cash inflows will be reinvested at predetermined rate.

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