Question

which of the following statements is correct?

the mirr and npv decision criteria can never conflict.

the irr method can never be subject to the multiple irr problem, while the mirr method can be.

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.

the higher the wacc, the shorter the discounted payback period.

the mirr method assumes that cash flows are reinvested at the crossover rate.

Explanation:

1. Analyze the first option: MIRR and NPV can conflict in some cases (e.g., mutually exclusive projects with different scales), so this is incorrect.
2. Analyze the second option: IRR can have multiple IRR problems (for non - normal cash flows), while MIRR avoids this. So this statement is wrong.
3. Analyze the third option: MIRR assumes reinvestment at the WACC (or another reasonable rate), while IRR assumes reinvestment at IRR. The reinvestment rate assumption of MIRR is generally more reasonable, so this statement is correct.
4. Analyze the fourth option: A higher WACC means cash flows are discounted more heavily, so the discounted payback period should be longer, not shorter. This is incorrect.
5. Analyze the fifth option: MIRR assumes reinvestment at the WACC (or the firm's cost of capital), not the crossover rate. This is incorrect.

Answer:

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.