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Where multiple rates of return exist, the safest course is to

  • A.choose the lowest of the rates found
  • B.abandon the analysis as impossible
  • C.use the present worth method instead
  • D.choose the highest of the rates found

Answer: C

Correct answer: use the present worth method instead

Present worth at the minimum attractive rate is unambiguous, requires no root-finding, and gives the right accept-or-reject decision whatever the shape of the cash flow. Choosing among several roots is arbitrary, since none of them is the project’s return in any meaningful sense.

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