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When NPV and IRR conflict for mutually exclusive projects, which should be preferred?

  1. A NPV, because it measures value added in absolute terms
  2. B IRR, because it is a percentage
  3. C Payback period
  4. D The shorter project
Answer

NPV, because it measures value added in absolute terms

IRR can also produce multiple solutions with unconventional cash flow patterns, which NPV does not.

All CFA MCQs

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