Question

In: Finance

Even if project X has a higher IRR than project Y, project Y may have a...

Even if project X has a higher IRR than project Y, project Y may have a higher net present value than project X. True or False?

Solutions

Expert Solution

Answer : True

When the projects are different in size and difference in cash flow timings, one project may have higher IRR but may have lower NPV and vice versa.

This is the main reason why IRR and NPV decisions conflict.

I have given an example of 2 projects which are different in size, and it shows what i explained. (Thumbs up please)


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