Question

True or false: the npv and irr methods can lead to conflicting decisions for mutually exclusive projects.

Answer 1

The npv and irr methods can lead to conflicting decisions for mutually exclusive projects. This statement is true.

The difference between the current value of cash inflows and withdrawals over a period of time is known as net present value (NPV). The internal rate of return (IRR), on the other hand, is a formula used to determine the profitability of possible investments.

Both of these metrics are largely employed in capital budgeting, a procedure used by businesses to assess the value of potential investments or expansions. When presented with an investment opportunity, a corporation must determine if making the investment will result in net economic gains or losses for the business.

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