The use of either the internal rate of return or the proﬁtability index could lead to incorrect
decisions when comparing mutually exclusive investments.

Question

Quizplus · Accepted Answer

The internal rate of return and profitability index do not always give consistent rankings when comparing mutually exclusive investments, leading to potential errors in decision making. It is important to consider other factors such as the size of the investment, cash flow timing, and risk when comparing investments.

The Use of Either the Internal Rate of Return or the Proﬁtability