The Net Present Value (NPV) and Internal Rate of Return

question 4

True/False

The net present value (NPV) and internal rate of return (IRR) methods will always lead to the same investment decisions when mutually exclusive projects are being evaluated. 

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Definitions:

Prospect Theory

A behavioral economics theory of preferences having three main features: (1) people evaluate options on the basis of whether they generate gains or losses relative to the status quo; (2) gains are subject to diminishing marginal utility, while losses are subject to diminishing marginal disutility; and (3) people are prone to loss aversion.

Behavioral Economists

Economists who study how psychological, social, cognitive, and emotional factors affect economic decisions and market outcomes.

Availability Heuristic

A mental shortcut that relies on immediate examples that come to mind when evaluating a specific topic, concept, method, or decision.