Aroma Candles, Inc. is evaluating a project with the following cash flows. The project involves a new product that will not affect the sales of any other project. Which two methods would always lead to the same accept/reject decision for this project, regardless of the discount rate? Year Cash Flows
0 ($120,000)
1 $30,000
2 $70,000
3 $90,000
A) Payback and Discounted Payback
B) NPV and Payback
C) NPV and IRR
D) Discounted Payback and IRR

Question

Quizplus · Accepted Answer

NPV (Net Present Value) and IRR (Internal Rate of Return) always provide consistent decisions because both are based on discounted cash flows. If the NPV is positive, the IRR exceeds the cost of capital, leading to the acceptance of the project.