Discuss the various circumstance under which the IIR and NPV criteria will lead to the same...

Question

Discuss the various circumstance under which the IIR and NPV criteria will lead to the same acceptance/rejection as well as when they might lead toconflict. Also use examples to explain your answer

Sandeep · Accepted Answer

IRR AND NPV CRITERIA
When analysing a single conventional Independent proposal, both NPV and IIR will deliver the same indicator /signals regarding whether to “Accept or Reject” proposals. Quite possible that some projects may be ranked higher due to higher NPV whereas some rank higher due to higher IIR. These variations occur due to different cash flows streams in both projects.
	Period
	Project X
	Project Y
	Year 0 
	-5000
	-5000
	Year 1
	2000
	00
	Year 2
	2000
	0
	Year 3
	2000
	0
	Year 4
	2000
	0
	Year 5
	2000
	15000
	NPV
	$ 2581.57
	$4313.82
	IIR
	29%
	25%
Thus, it is evident that Project X has higher IIR whereas Project Y has higher NPV. Therefore, if these proposals are independent,

Discuss the various circumstance under which the IIR and NPV criteria will lead to the same acceptance/rejection as well as when they might lead to conflict. Also use examples to explain your answer

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