If NPV and IRR Produce Different Rankings, Which Method Should

question 2

Multiple Choice

If NPV and IRR produce different rankings, which method should be used in choosing investment projects?

• A)payback
• B)accounting rate of return
• C)net present value
• D)internal rate of return

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Definitions:

Temporary Accounts

Accounts used to collect revenues, expenses, and withdrawals for a single accounting period, which are then closed and transferred to permanent accounts at period end.

Capital Balance

The portion of the equity section in a company's balance sheet that shows the net worth attributable to the owners or shareholders.

Adjusting Journal Entries

Entries made at the end of an accounting period to update the accounts and ensure accurate financial reporting.

Financial Statements

Documents that provide an overview of a company's financial condition, including balance sheets, income statements, and cash flow statements.