Explain under what circumstances the NPV and IRR could provide different decisions.

Question

Question

business finance

Answer 1

Answer #1

There can be conflicting results with NPV and IRR, both can provide different decisions.

1. Difference in Project Scale: When both the projects may have different initial costs.

2. Difference in Cash flow timings: The difference may be because both the projects may be difference in cash flow timings

3. Difference in Horizon: When the time horizon for the investment projects when they different.

Answer 2

Similar Homework Help Questions

1: Under what circumstances might the IRR and NPV approaches produce conflicting results? 2: Explain why...

1: Under what circumstances might the IRR and NPV approaches produce conflicting results? 2: Explain why the owners of a company might choose to keep it private? 3: Define underpricing, and explain why the majority of IPOs are underpriced. What role do investment banks play in the price-setting process?
is this right? NPV and IRR can provide contradictory decisions for mutually exclusive projects when the...

is this right? NPV and IRR can provide contradictory decisions for mutually exclusive projects when the discount rates on the projects may differ. the scale of the projects may differ. the risk of the projects may differ. all of the above. Question 16 (2 points) Saved AVANA CALnan hand.
Which of the following is not true about IRR and NPV? IRR assumes cash flows are...

Which of the following is not true about IRR and NPV? IRR assumes cash flows are reinvested at the firm’s IRR, whereas, NPV assumes cash flows are reinvested at the firm’s WACC. The timing of cash flows impacts both IRR and NPV. A large cash outflow hurts NPV more than it does IRR. They provide the same accept or reject decisions for independent projects.

6. If IRR and NPV give different answers a. use IRR always b. use NPV always...

6. If IRR and NPV give different answers a. use IRR always b. use NPV always c. Use IRR if mutually exclusive projects d. use IRR if independent projects 7. If you are expressing all cash flows in future dollars, you use the to discount future cash fiows a. The IRR interest rate b. The nominal interest rate c. The real interest rate d. The corrected interest rate multiple assumptions to see how it affects NPV is an example of
Explain what payback period, NPV and IRR are in layman’s terms.

Explain what payback period, NPV and IRR are in layman’s terms.
When might the IRR rule provide different guidance regarding project selection than the NPV rule? a)...

When might the IRR rule provide different guidance regarding project selection than the NPV rule? a) When a project has net expenditures (costs) that occur after positive cash inflows. b) When a project has two or more years of initial net expenditures, followed only by cash inflows. c) When a project has multiple IRRs. d) When deciding between mutually exclusive projects with different initial investment amounts. When might the IRR rule provide different guidance regarding project selection than the NPV...

3. a) Under what circumstances does a multithreaded program using multiple kernel threads provide better performance...

3. a) Under what circumstances does a multithreaded program using multiple kernel threads provide better performance than a single-threaded program on a single-processor machine? Explain. b) Under what circumstances does a multithreaded program using multiple kernel threads provide better performance than a single-threaded program on a multi-processor machine? Explain.
1) Under what circumstances is mechanical energy conserved? Under what circumstances is momentum conserved? How is...

1) Under what circumstances is mechanical energy conserved? Under what circumstances is momentum conserved? How is this different than the criteria for conservation of mechanical energy?
Under what circumstances would it be appropriate for a firm to use different costs of capital...

Under what circumstances would it be appropriate for a firm to use different costs of capital for its different operating divisions? If the overall firm WACC were used as a hurdle rate for all divisions, would the riskier divisions or the more conservative divisions tend to get most of the investment projects? Why? Make sure to explain your answers.

Under what circumstances could involuntary manslaughter be a lesser included offense to murder?

Under what circumstances could involuntary manslaughter be a lesser included offense to murder?