Contrast the IRR and the NPV methods. Under what circumstance may they
lead to (a) comparable...

Question

Contrast the IRR and the NPV methods. Under what circumstance may they
lead to (a) comparable recommendations, and (b) give conflicting
recommendations? In circumstances in which they give contradictory results,
which criteria should be used to select the project and why?

Sandeep · Accepted Answer

IRR AND NPV METHODS
NPV concept work on the presumption that incremental cash flow will be reinvested at a cut-off/Hurdle rate, whereas the IRR approach works on the assumption that intermediate cash flow will get re-invested at the prevailing IRR. 
Both methods exhibit similar output regarding “Accept or Reject” criteria so as far as independent investment project proposals matter. In an Independent and standalone project, the 2 proposals don’t compete as each NPV result is completely independent of the IRR outcome,

Contrast the IRR and the NPV methods. Under what circumstance may they lead to (a) comparable recommendations, and (b) give conflicting recommendations? In circumstances in which they give...

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