The IRR of normal Project X is greater than the IRR of normal Project Y,and both IRRs are greater than zero.Also,the NPV of X is greater than the NPV of Y at the required rate of return.If the two projects are mutually exclusive,Project X should definitely be selected,and the investment made,provided we have confidence in the data.Put another way,it is impossible to draw NPV profiles that would suggest not accepting Project X.

Question

Quizplus · Accepted Answer

While Project X has a higher IRR and NPV at a specific discount rate, NPV profiles could intersect, meaning that at different discount rates, Project Y could have a higher NPV. The decision depends on the discount rate relative to the IRRs.

The IRR of Normal Project X Is Greater Than the IRR