Which of the following statement is INCORRECT? IRR (internal rate of return) cannot distinguish between a borrowing project and a lending project. One important point to remember while estimating the cash flows of a project is that we should always estimate cash flows on an incremental basis and on an after-tax basis. Proper treatment of inflation in NPV calculations involves discounting nominal cash flows by the real discount rate. It is recommended not to calculate equivalent annual cash flows as level of nominal annuities. The reason is that at the higher inflation rate, the project with the longer life is affected more, leading to incorrect rankings