1. Which of the following statements is FALSE?
A) When using the incremental IRR rule, you must keep track of which project is the incremental project and ensure that the incremental cash flows are initially positive and then become negative.
B) Picking one project over another simply because it has a larger IRR can lead to mistakes.
C) Problems arise using the IRR method when the mutually exclusive investments have differences in scale.
D) When the risks of two projects are different, only the NPV rule will give a reliable answer.
2. You are trying to decide between three mutually exclusive investment opportunities. The most appropriate tool for identifying the correct decision is:
A) NPV.
B) profitability index.
C) IRR.
D) incremental IRR.