As a financial analyst for a large firm you are investigating two mutually exclu

Question

As a financial analyst for a large firm you are investigating two mutually exclusive investment projects for the firm, project A and project B. After your analysis you find that the IRRA>IRRB, but that the NPVA<NPVB. Given this information you should:

Choose A because NPV results do not apply with mutually exclusive projects

Choose B because IRR results do not apply with mutually exclusive projects

Choose neither project because of conflicting results

See if you can get a different job because you have no idea what you are doing

Choose both projects as the results indicate either will work

Explanation / Answer

When the we are faced with an issue like IRRA >IRRB and NPVA<NPVB for two mutually exclusive projects, we need to go by the NPV rule and choose project B due to the following reasons

Hence the answer is   - Choose B because IRR results do not apply with mutually exclusive projects

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