A company is evaluating two projects: Project A has a high…
A company is evaluating two projects: Project A has a higher NPV but a lower IRR. Project B has a lower NPV but a higher IRR. Both projects require the same initial investment, but only one can be chosen. Senior management favors Project B, arguing that its higher IRR shows better efficiency. However, the CFO insists on selecting Project A. Which of the following best explains why the CFO’s recommendation is correct?