In the case of mutually exclusive projects, NPV and PI are likely to yield conflicting decisions when:
A)the projects require the same net investment
B)the projects are significantly different in size
C)multiple rates of return are a possibility
D)none of these

Question

Quizplus · Accepted Answer

When projects are significantly different in size, NPV and PI can yield conflicting decisions because NPV is an absolute measure and favors larger projects, while PI is a relative measure and may favor smaller projects with higher profitability per unit of investment.

In the Case of Mutually Exclusive Projects, NPV and PI