Solved: Why is the irr ranking misleading, Project Management

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Why is the irr ranking misleading

Problem: Just One, Inc. has two mutually exclusive investment projects P & Q, shown below. Suppose the interest rate is 10%.

Project Investment Year 1 Year 2 IRR NPV(r=10%)
P -200.00 140 128.25 22.4% 33.26
Q -100.00 80.00 56.25 25.0% 19.21

The ranking of projects differs on the use of IRR or NPV measures. Which project should be selected? Why is the IRR ranking misleading?

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Project Management: Why is the irr ranking misleading

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Project Management: Why is the irr ranking misleading

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