Ranking conflicts between NPV and IRR,
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What is the underlying cause of ranking conflicts between NPV and IRR?
Why do you get a conflict in rankings with IRR and NPV?
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The causes of ranking conflicts between NPV and IRR are discussed.
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What is the underlying cause of ranking conflicts between NPV and IRR?
Ranking conflicts arise when the NPV criterion chooses one project over the other whereas the IRR criterion recommends exactly the opposite.
This problem arises when we have to select between two mutually exclusive projects
There are two conditions under which conflicts arise between NPV and IRR:
1) When project size (or scale) differences exist-investmement in one project is larger than in the second project
2) When timing differences exist- timing of cash flows from two projects differ such that in one case the cash flows from one project come in the early years while most of the cash flows from the second ...
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