Question

True or False and why?

3. An increase in the weighted average cost of capital will result in an increase in a projects internal rate of return, assuming all other conditions hold constant.

4. Conflicts between two independent projects occasionally occur, where the NPV method ranks one project higher but the IRR method puts the other one first. In theory, such conflicts should be resolved in favor of the project with the higher NPV.

Answer 1

An increase in the weighted average cost of capital will result in an increase in a projects internal rate of return, assuming all other conditions hold constant.

Statement is false

IRR dosent depends on Cost of Capital IRR is the internal rate of return of a project

Conflicts between two independent projects occasionally occur, where the NPV method ranks one project higher but the IRR method puts the other one first. In theory, such conflicts should be resolved in favor of the project with the higher NPV.

Statement is True

when comparing two projects, the Net present value and internal rate of return may provide conflicting results. that is one project has higher NPV while the other has a higher IRR. This difference occur because of different cash flow patterns in the two projects.