Choose the answer below that does not describe the circumstances where IRR conflicts with NPV in the decision to accept a project.
A) If the sign of the project's cash flows changes more than once during the life of a project
B) When two or more projects are mutually exclusive.
C) When two or more projects are independent
D) IRR assumes that all cash flows received during the life of a project are reinvested at the IRR while the NPV method assumes that they are reinvested at the cost of capital rate

Question

Quizplus · Accepted Answer

IRR conflicts with NPV in mutually exclusive projects (B) and when the sign of cash flows changes more than once (A). Option D also describes a circumstance where IRR conflicts with NPV. Option C does not describe a circumstance where IRR conflicts with NPV, as independent projects do not affect each other's cash flows and do not compete for the same resources. Therefore, the correct answer is C.

Choose the Answer Below That Does Not Describe the Circumstances