The underlying cause of ranking conflicts between the NPV and IRR methods is differing:
A) Initial cost.
B) Reinvestment rate assumption.
C) Cash flow timing.
D) Profitability indices.
E) Errors in calculating the discount rate.

Question

Quizplus · Accepted Answer

The IRR method does not evaluate the project at a particular discount rate, so it cannot be used for ranking mutually exclusive projects.

The Underlying Cause of Ranking Conflicts Between the NPV and IRR