Comparison of Two Mutually Exclusive Projects: A CFA® Level 1 Exam Perspective

Comparing Two Mutually Exclusive Projects

Prev Question Next Question

Question

In comparing two mutually exclusive projects of equal size and equal life, which of the following statements is most correct?

Answers

A. None of these answers are correct.

B. The project with the higher NPV may not always be the project with the higher IRR.

C. The project with the higher NPV may not always be the project with the higher MIRR.

D. The project with the higher IRR will always be the project with the higher MIRR.

E. All of the answers are correct.

Show Answer

Explanations

Click on the arrows to vote for the correct answer

A. B. C. D. E.

Due to reinvestment rate assumptions, NPV and IRR can lead to conflicts; however, there will be no conflict between NPV and MIRR if the projects are equal in size (which is one of the assumptions in this question).

Prev Question Next Question