CMA Final Paper 14 (SFM) Practice Questions - CMA Final Paper 14 Strategic Financial Management Exam

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When NPV and IRR give conflicting rankings for two mutually exclusive projects, which method should be relied upon and why?

IRR, because percentages are easier to interpret Payback, because it is simplest NPV, because it directly measures the absolute addition to shareholder wealth Accounting Rate of Return, because it uses profits

Correct Answer:

NPV, because it directly measures the absolute addition to shareholder wealth

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