If the IRR of normal Project X is greater than the IRR of mutually exclusive Project Y (also normal), we can conclude that the firm will select X rather than Y if X has a NPV 0.

Name: If the IRR of normal Project X is greater than the IRR of mutually exclusive Project Y (also normal), we can conclude that the firm will select X rather than Y if X has a NPV > 0.
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Question

If the IRR of normal Project X is greater than the IRR of mutually exclusive Project Y (also normal), we can conclude that the firm will select X rather than Y if X has a NPV > 0.

Quizplus · Accepted Answer

The firm should select the project with the higher NPV, not necessarily the higher IRR, especially when projects are mutually exclusive.

If the IRR of Normal Project X Is Greater Than