Conflicts between two mutually exclusive projects, where the NPV method chooses one project but the IRR method chooses the other, should generally be resolved in favor of the project with the higher NPV.

Question

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The NPV method is considered to be a more reliable measure of a project's profitability as it takes into account the time value of money, whereas the IRR method assumes that cash flows are reinvested at the project's internal rate of return (which may not be realistic). Therefore, conflicts between the two methods should be resolved in favor of the project with the higher NPV.

Conflicts Between Two Mutually Exclusive Projects, Where the NPV Method