No conflict will exist between the NPV and IRR methods, when used to evaluate two equally risky but mutually exclusive projects, if the projects' cost of capital exceeds the rate at which the projects' NPV profiles cross

Finance Dec 26, 2020

No conflict will exist between the NPV and IRR methods, when used to evaluate two equally risky but mutually exclusive projects, if the projects' cost of capital exceeds the rate at which the projects' NPV profiles cross.

True

False

Expert Solution

The Correct answer is True

The Rate at which NPV profile cross is the Crossover rate at which if the cash flows are discounted will lead to same Net present value, Thus, If the cost of capital exceed the rate at which the project NPV profile cross will lead to same decision for NPV and IRR.

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