Assume you use all available methods to evaluate projects.If there is a conflict in the indicated accept/reject decision between two mutually exclusive projects due to the IRR-based indicator,you should:
A)accept both projects if both are acceptable according to NPV.
B)combine both projects into one larger project.
C)ignore the IRR and rely on the decision indicated by the NPV method.
D)base the final decision on the payback method.
E)reject both projects due to ambiguity in the decision-making process.

Question

Quizplus · Accepted Answer

The NPV method is considered to be a more reliable method of evaluating projects compared to the IRR method. Hence, if there is a conflict between the two methods, the decision indicated by the NPV method should be relied upon. This is because the NPV method considers the time value of money and is not subject to the problems associated with the IRR method, such as multiple rates of return and non-conventional cash flows. Therefore, option C is the best choice.

Assume You Use All Available Methods to Evaluate Projects