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    Question

    Project A has cash flows of ₹-10 lakh (initial),

    ₹3L, ₹4L, ₹5L over 3 years. Project B has the same initial investment but generates ₹6L, ₹4L, ₹2L. At 10% discount rate, which project has higher NPV, and which has higher IRR?
    A A has higher NPV, B has higher IRR Correct Answer Incorrect Answer
    B A has both higher NPV and IRR Correct Answer Incorrect Answer
    C B has higher NPV, A has higher IRR Correct Answer Incorrect Answer
    D Both projects have equal IRR Correct Answer Incorrect Answer

    Solution

    Project A gives rising cash flows → Higher NPV at 10% Project B has earlier cash flows → Higher IRR due to timing Hence, A is better in NPV, B in IRR

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