The reason why the IRR criterion can give conflicting signals with mutually exclusive projects is:
A) the NPVs of these projects cross over at some discount rate.
B) discounted cash flow is not considered with mutually exclusive projects.
C) IRR performs better with accounting returns than with cash flows.
D)mutually exclusive projects have multiple IRRs

Question

Quizplus · Accepted Answer

The IRR criterion can give conflicting signals with mutually exclusive projects because the NPVs of these projects may cross over at some discount rate, making it difficult to determine which project is more financially advantageous. In other words, the IRR may suggest one project is better at one discount rate, while the other project is better at a different discount rate. This is why the NPV criterion is typically preferred for evaluating mutually exclusive projects.

The Reason Why the IRR Criterion Can Give Conflicting Signals