Which of the following situations can lead to IRR giving a different decision than NPV?
A) delayed investment
B) multiple IRRs
C) differences in project scale
D) All of the above can lead to IRR giving a different decision than NPV.

Question

Quizplus · Accepted Answer

All the given situations can lead to IRR giving a different decision than NPV.

Delayed investment: When the investment is delayed, it can affect the cash flows of the project and this can lead to IRR giving a different decision than NPV.

Multiple IRRs: If a project has multiple IRRs, it can lead to confusion in choosing the discount rate. In such situations, IRR may not provide a clear decision on whether to invest in the project or not, which can be different from NPV.

Differences in project scale: If two projects have different scales, comparing them using IRR may not be suitable. In such scenarios, NPV can provide a better decision-making tool as it accounts for the cash flows over the project's lifespan.

Which of the Following Situations Can Lead to IRR Giving