The Main Reason That the Net Present Value (NPV) Method

question 39

True/False

The main reason that the net present value (NPV) method is regarded as being conceptually superior to the internal rate of return (IRR) method for the purpose of evaluating mutually exclusive investments, is that mutually exclusive projects have multiple internal rates of return (IRRs). 

---

Definitions:

Binding Price Floor

A minimum price set by the government or body above the equilibrium price, leading to excess supply if the market cannot legally adjust to its equilibrium.

Sellers

Market participants involved in providing goods or services for purchase, playing a key role in the supply side of the economy.

Equilibrium Price

The market price at which the quantity demanded equals the quantity supplied, leading to a stable market condition.

Price Floor

A government- or authority-set minimum price for a particular good or service, designed to protect producers.