If NPV and IRR produce different rankings, which method should be used in choosing investment projects?

Question

Quizplus · Accepted Answer

Net present value (NPV) is the preferred method for choosing investment projects when NPV and IRR produce different rankings. This is because NPV takes into consideration the time value of money and provides an actual dollar amount value of the investment, while IRR only considers the percentage return. Therefore, NPV is more reliable for making investment decisions. Payback and accounting rate of return are not as reliable as they do not consider the time value of money, and internal rate of return may not provide an accurate picture if there are multiple IRRs.

If NPV and IRR Produce Different Rankings, Which Method Should