In the case of mutually exclusive projects, NPV and PI are likely to yield conflicting decisions when:
A) the projects require the same net investment
B) the projects are significantly different in size
C) multiple rates of return are a possibility
D) none of the above

Question

Quizplus · Accepted Answer

When projects are significantly different in size, NPV and PI can yield conflicting decisions because NPV is an absolute measure and favors larger projects, while PI is a relative measure and may favor smaller projects with higher efficiency per unit of investment.

In the Case of Mutually Exclusive Projects, NPV and PI