CFA Practice Question

There are 233 practice questions for this study session.

CFA Practice Question

Two mutually exclusive projects have conventional cash flows, but one project has a larger NPV while the other project has a higher IRR. Which of the following factors least likely explains this conflict?
A. Risk of the projects as reflected in the required rate of return
B. Size of the projects' initial investments
C. Reinvestment rate assumption
Explanation: Conflicting decision rules based on the NPV and IRR methods are related to the reinvestment rate assumption, the timing of the cash flows, or the scale of the projects. Differing required rates of return are not related to conflicting NPV and IRR decisions.

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