Projects with smaller initial investments may have higher PIs and IRRs, but their small size may appear to make them less attractive from an NPV perspective.

Question

Quizplus · Accepted Answer

This is because NPV takes into account the total cash flows of a project, while PI and IRR only consider the relative size of the returns compared to the initial investment. A smaller project may have a higher percentage return, but a larger project may have a higher total net present value of cash flows.

Projects with Smaller Initial Investments May Have Higher PIs and IRRs