Answer each question fully.
The finance department of a large corporation has evaluated a possible capital project using the NPV method, the Payback Method, and the IRR method. The analysts are puzzled, since the NPV indicated rejection, but the IRR and Payback methods both indicated acceptance. Explain why this conflicting situation might occur and what conclusions the analyst should accept, indicating the shortcomings and the advantages of each method. Assuming the data is correct, which method will most likely provide the most accurate decisions and why?
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Answer each question fully. The finance department of a large co.docx
1. Answer each question fully.
The finance department of a large corporation has evaluated a
possible capital project using the NPV method, the Payback
Method, and the IRR method. The analysts are puzzled, since
the NPV indicated rejection, but the IRR and Payback methods
both indicated acceptance. Explain why this conflicting
situation might occur and what conclusions the analyst should
accept, indicating the shortcomings and the advantages of each
method. Assuming the data is correct, which method will most
likely provide the most accurate decisions and why?
