Project X has an internal rate of return of 20 percent. Project Y has an internal rate of return of 15 percent. Both projects have a positive net present value. Which of the following statements is most correct?
A) Project X must have a higher net present value than Project Y.
B) If the two projects have the same WACC, Project X must have a higher net present value.
C) Project X must have a shorter payback than Project Y.
D) Both answers b and c are correct.
E) None of the above answers is correct.

Question

Quizplus · Accepted Answer

The internal rate of return (IRR) does not necessarily correlate with the net present value (NPV) or payback period. A higher IRR does not guarantee a higher NPV or shorter payback period, as these depend on the scale and timing of cash flows.

Project X Has an Internal Rate of Return of 20