When the internal rate of return (IRR) method and the net present value (NPV) method do not yield the same recommendation for the same investment project, the project-selection decision should normally be based on:

Multiple Choice

• NPV, because it takes into consideration the relative size of the initial investment.

• NPV, because all reinvestment of funds occurs at the discount rate that will make the NPV of the project equal to zero.

• IRR, because all reinvestment of funds occurs at the rate of the cost of capital and because it takes into consideration the relative size of the initial investment.

• IRR, because all reinvestment of funds occurs at the discount rate that will make the NPV of the project equal to zero.

• IRR, because all reinvestment of funds occurs at the rate the project generates and because it takes into consideration the relative size of the initial investment.