When considering both NPV and IRR, which statement is true with regards to selecting a project? Group of answer choices You should only choose a project if both the NPV and the IRR are higher than those of the alternative project. You should choose the project with the higher IRR even if it has the lower NPV. You should always choose the project with the higher IRR. You should choose the project with the higher NPV even if it has the lower IRR.

When you have to choose between two mutually exclusive projects, the net present factor (NPV) is the item to consider. You should always choose only projects with a positive NPV, and if both have positive NPVs, then choose the one with the highest. The internal rate of return (IRR) has a serious flaw, it assumes that cash flows are reinvested at the same rates, and that is usually not true in the real world. The IRR is subject to reinvestment risk, which means that it is likely that future cash flows generated by the project will not generate the same rate of returns.

Parrain Parrain · Answer 2 · 2021-10-28T12:10:00+02:00

When using IRR and NPV to evaluate a project, You should choose the project with the higher NPV even if it has the lower IRR.

When evaluating a project, you can use the following:

Internal Rate of Return which shows the rate that would make the NPV zero
Net Present Value (NPV) which shows the present value of income after costs

The Net Present Value takes precedence over the IRR which means that if you encounter a situation where NPV is higher on a project than on another project yet the IRR is lower, you should take the project with the larger NPV.

In conclusion, pick the project with the higher NPV regardless of the IRR.

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