With Independent Projects, NPV and IRR Provide Identical Accept/reject Decisions

question 70

Multiple Choice

With independent projects, NPV and IRR provide identical accept/reject decisions. If, however, you have two mutually exclusive projects to evaluate, the most accurate thing you could say about the eventual results is that:

• A) NPV and IRR may give conflicting rankings
• B) NPV and IRR never give the same rankings
• C) NPV and IRR always give the same rankings
• D) IRR is more lenient in accepting

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Definitions:

Objective Value

The perceived worth of a good or service based on its ability to fulfill a need or want, as opposed to subjective personal preferences.

Opportunity Cost

The cost of foregone alternatives, representing the benefits that could have been received by choosing the next best alternative.

Subjective Values

The personal importance or worth that an individual places on a good or service, which can vary greatly between people.

Time Costs

The opportunity costs associated with the time spent on an activity instead of other, potentially more valuable, activities.