Which statement is correct? IRR will give you correct decision if it is applied

Question

Which statement is correct?

IRR will give you correct decision if it is applied to mutually exclusive projects.

If NPV and IRR give you contradictory decisions, you should follow NPV.

IRR rule is the best rule to apply when making capital budgeting decisions.

NPV will give you incorrect decision if it is applied to mutually exclusive projects

IRR will give you correct decision if it is applied to mutually exclusive projects.

If NPV and IRR give you contradictory decisions, you should follow NPV.

IRR rule is the best rule to apply when making capital budgeting decisions.

NPV will give you incorrect decision if it is applied to mutually exclusive projects

Explanation / Answer

If NPV and IRR give you contradictory decisions , you should follow NPV

Because, NPV assumes cash flows from the project are reinvested at the firm's cost of capital , whereas IRR assumes cash flows are reinvested at the project's IRR.

Related Questions

Navigate

• Browse (All)
• Browse W
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.