NPV and IRR can lead to different decisions in situations where project cash flow are conventional.

Question

Quizplus · Accepted Answer

NPV (Net Present Value) and IRR (Internal Rate of Return) can lead to different decisions primarily in situations where project cash flows are unconventional (i.e., the cash flow sign changes more than once) or when comparing mutually exclusive projects with different scales or timing of cash flows. In conventional cash flow projects (initial cash outlay followed by a series of positive cash flows), both NPV and IRR will generally lead to the same accept/reject decision for a single project.

NPV and IRR Can Lead to Different Decisions in Situations