Any difference in the magnitude or timing of the cash flows derived from investment projects may cause a difference in the ranking of investment projects using the internal rate of return and net present value methods.

Question

Quizplus · Accepted Answer

This statement is true. The internal rate of return (IRR) and net present value (NPV) methods rely on the timing and magnitude of cash flows, so variations in these factors can affect the rankings of investment projects. For example, a project with higher upfront costs but faster and larger cash inflows may have a higher IRR but a lower NPV compared to a project with lower upfront costs but slower and smaller cash inflows.

Any Difference in the Magnitude or Timing of the Cash