The net present value method of project evaluation is preferred to the internal

Question

The net present value method of project evaluation is preferred to the internal rate of return because:

a) The IRR method may give multiple rates of return or zero rates of return in some cases, but not for mutually exclusive projects.

b) The IRR method may give an inconsistent rank due to the magnitude or timing of cash flow.

c) Most projects are independent rather than mutually exclusive.

d) The IRR method yields net present value profiles that do not intersect for mutually exclusive projects.

Please briefly explain!!

Explanation / Answer

b) The IRR method may give an inconsistent rank due to the magnitude or timing of cash flow.

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