In comparing two mutually exclusive projects of equal size and equal life, which of the following statements is most correct?
A)The project with the higher NPV may not always be the project with the higher IRR.
B)The project with the higher NPV may not always be the project with the higher MIRR.
C)The project with the higher IRR may not always be the project with the higher MIRR.
D)All of the above answers are correct.
E)Answers a and c are both correct.

Question

Quizplus · Accepted Answer

Both statements a and c are correct. The reason for this is that NPV and IRR use different discount rates to calculate project profitability. Additionally, while IRR measures the annualized return on investment, MIRR takes into account the reinvestment rate of cash flows. Therefore, the project with the higher NPV may have a lower IRR and the project with the higher IRR may have a lower MIRR.

In Comparing Two Mutually Exclusive Projects of Equal Size and Equal