The NPV and IRR methods,when used to evaluate independent and equally risky projects,will lead to different accept/reject decisions if their IRRs are greater than the cost of capital.

Question

Quizplus · Accepted Answer

Both NPV (Net Present Value) and IRR (Internal Rate of Return) methods will generally lead to the same accept/reject decisions for independent projects as long as the projects' cash flows are conventional (i.e., an initial outlay followed by a series of positive cash inflows) and the cost of capital is not changing. The difference in accept/reject decisions typically arises in projects with non-conventional cash flows or in the comparison of mutually exclusive projects.

The NPV and IRR Methods,when Used to Evaluate Independent and Equally