Question: Ranking is an important consideration when projects are mutually exclusive or when capital rationing is necessary. When projects are mutually exclusive, ranking enables the firm

Ranking is an important consideration when projects are mutually exclusive or when capital rationing is necessary. When projects are mutually exclusive, ranking enables the firm to determine which project is best from a financial standpoint. When capital rationing is necessary, ranking projects will provide a logical starting point for determining what group of projects to accept. However, there are instances wherein Financial Managers are faced with conflicting rankings using NPV and IRR. It is difficult to choose one approach over the other, because the theoretical and practical strengths of the approaches differ. Interpret both NPV and IRR techniques by highlighting its respective strengths and weaknesses in both theoretical and practical dimensions

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