All of the following statements are correct except:
A) The NPV and IRR methods will always agree on whether a project enhances or harms shareholder wealth.
B) If a project has a positive NPV, its IRR will always be greater than the cost of capital.
C) If a project has a positive NPV, its IRR will always be less than the cost of capital.
D) There is sometimes a conflict between NPV and IRR in the case of mutually exclusive projects.

Question

Quizplus · Accepted Answer

Statement C is incorrect. If a project has a positive NPV, its IRR may be greater than or less than the cost of capital, depending on the size and timing of cash flows. Therefore, the two methods may not always agree on the ranking of projects. Statements A, B, and D are correct.

All of the Following Statements Are Correct Except