Under what conditions can a rate-based statistic yield a different accept/reject decision than NPV?
A) Independent projects that are evaluated at a high cost of capital.
B) Mutually exclusive projects that are evaluated at a low cost of capital.
C) Any projects that exhibit differences in scale or timing.
D) Mutually exclusive projects that exhibit differences in scale or timing.

Question

Quizplus · Accepted Answer

Rate-based statistics like IRR can yield different decisions than NPV when comparing mutually exclusive projects with differences in scale or timing, as IRR does not account for the magnitude of cash flows or differing cash flow patterns.

Under What Conditions Can a Rate-Based Statistic Yield a Different