If the projects are mutually exclusive, only one project can be chosen. The IRR and NPV methods will not always choose the same project. If the crossover rate on the NPV profile is below the horizontal axis, the methods will (pick one of the answers never, sometimes, or always) agree.

Projects Y and Z are mutually exclusive projects. Their cash flows and NPV profiles are shown as follows.

Year	Project Y	Project Z
0	-1500	-1500
1	200	900
2	400	600
3	600	300
4	1,000	200

If the required rate of return for each project is 10 percent, do the NPV and IRR methods agree or conflict?

A) The methods conflict

B) The methods agree

A key to resolving this conflict is the assumed reinvestment rate. The NPV calculation implicity assumes that intermediate cash flows are reinvested at the (IRR, REQUIRED RATE OF RETURN, MIRR), and the irr calculation assumes that the rate at which cash flows can be invested is that IRR, REQUIRED RATE OF RETURN, MIRR).

As a result, when evaluating mutally exclusive projects, the NPV, IRR IS usually the better decision criterion.