The internal rate of return and the net present value methods usually result in the same investment decisions.

Question

Quizplus · Accepted Answer

Both the Internal Rate of Return (IRR) and the Net Present Value (NPV) methods are used in capital budgeting to evaluate investment projects. They usually lead to the same accept or reject decisions because both methods are based on the principle of discounted cash flows. However, discrepancies can occur in specific scenarios, such as projects with non-conventional cash flows or when comparing mutually exclusive projects with different scales or timing of cash flows.

The Internal Rate of Return and the Net Present Value