IRR is superior to NPV as an evaluation technique because the IRR decision rule is the same regardless of whether the project being evaluated is a financing project or an investment project.

Question

Quizplus · Accepted Answer

IRR and NPV are both useful evaluation techniques, but each has its own advantages and disadvantages. While IRR calculates the rate of return for an investment, NPV compares the present value of cash inflows with the present value of cash outflows to determine whether a project is financially feasible. It is not accurate to say that IRR is superior to NPV or vice versa, as each tool serves a different purpose. Additionally, the decision rule for IRR versus NPV can vary depending on the type of project being evaluated, so it is not true that IRR has a consistent decision rule regardless of project type.

IRR Is Superior to NPV as an Evaluation Technique Because