Question

1(a). (TRUE or FALSE?) Whenever there is a ranking conflict between net present value and internal rate of return we generally suggest that the project with the highest net present value be chosen.

1(b). (TRUE or FALSE?) The acceptable independent projects can be ranked by using the IRR methodology, from lowest to the highest IRR.

1(c). (TRUE or FALSE?) When evaluating proposed projects with the IRR method, those projects with IRRs that are less than the required rate of return are rejected.

Answer 1

The statement is false, when there is conflict between IRR and NPV, then the project with highest IRR should be selected.

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The statement is false.

The ranking is done in descending order, project with highest IRR will be ranked 1 and so on

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The statement is true.

IRR should be more than the required rate of return or cost of capital, then only the project will be profitable.

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Hope this answer your query.

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