If there is a conﬂict between mutually exclusive projects due to the IRR, one should:
A)drop the two projects immediately.
B)spend more money on gathering information.
C)depend on the NPV as it will always provide the most value.
D)depend on the AAR because it does not suffer from these same problems.
E)None of the above.

Question

Quizplus · Accepted Answer

The NPV (Net Present Value) method is generally considered more reliable than IRR (Internal Rate of Return) when evaluating and choosing between mutually exclusive projects. This is because NPV directly measures the increase in value to the firm, taking into account the size of the project, the cost of capital, and the timing of cash flows, thus providing a clear indication of the project's contribution to wealth.

If There Is a Conﬂict Between Mutually Exclusive Projects Due