First question in picture answer choices: sometimes never always 2) if the weighted average cost of capital for each project is 10%, do the NPv and IRR methods agree or conflict? 3) a key to resolving this conflict is the assumed reinvestment rate. The NPV calculation implicitly assumes that intermediate cash flows are reinvested at the (MIRR or IRR or required rate of return), and the IRR calculation assumes that the rate at which cash flows can be reinvested is the (same choices as before). 4) as a result, when evaluating mutually exclusive projects, the (IRR method or NPV method) is usually the better decision criteria.

Ch 11: Assignment - The Basics of Capital Budgeting If mutually exclusive projects with normal cash flows are being analyzed, the net present value (NPV) and internal rate of return (IRR) methods agree. Projects W and X are mutually exclusive projects. Their cash flows and NPV profiles are shown as follows. Year Project W Project X 0 -$1,000 -$1,500 $200 $350 2 $350 $500 13 $400 $600 $600 $750 NPV [Dollars) 600 Project X 4OO Project W 200 -200 0 2 4 6 8 10 12 14 16 18 20 Eagle Bank.pdf