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Ranking conflicts can arise if one relies on IRR instead of NPV when: Multiple Choice The...

Ranking conflicts can arise if one relies on IRR instead of NPV when:

Multiple Choice

  • The first cash flow is negative and the remaining cash flows are positive.

  • Projects are independent of one another.

  • A project has more than one NPV.

  • Projects are mutually exclusive.

  • The profitability index is greater than one.

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Answer #1

The NPV and IRR approaches use different reinvestment rate assumptions so there can be a conflict in project acceptance when mutually exclusive projects are considered.

Hence, the answer is option c.

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