When the IRR rule is used for mutually exclusive projects,we should mainly rely on
A) the rule of the Modified Internal Rate of Return (MIRR).
B) the rule of the Incremental Internal Rate of Return (IIRR).
C) the rule of the Net Present Value (NPV).
D) the rule of the normal Internal Rate of Return (IRR).

Question

Quizplus · Accepted Answer

When evaluating mutually exclusive projects, the best method to rely on is the Net Present Value (NPV) rule. This is because NPV takes into account the time value of money and provides a clear indication of whether the project will generate positive or negative cash flows. The IRR rule can sometimes lead to inaccurate conclusions when comparing two mutually exclusive projects, and the MIRR and IIRR rules are not widely used in practice. Therefore, the NPV rule is the best choice for evaluating mutually exclusive projects.

When the IRR Rule Is Used for Mutually Exclusive Projects,we