Ranking conflict net present value & internal rate of return, Financial Management

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Explain how to resolve a "ranking conflict" between the net present value and the internal rate of return.  Why should the conflict be resolved as you explained?

Whenever there is a ranking disagreement between net present value and internal rate of return we usually suggest that the project with the highest net present value be chosen.  This is for the reason that the net present value method ties more directly with the primary financial goal of the firm, to maximize firm value

 


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