When considering two mutually exclusive capital budgeting projects with conflicting rankings—one has a higher positive net present value (NPV), the other has a higher internal rate of return (IRR)-- the most appropriate conclusion is to choose the project with the:
The project with the higher NPV should be undertaken because NPV measures the increase in wealth as a result of taking the project. For mutually exclusive projects, IRR may give incorrect decisions as a result of scale and/or cash flow timing effects. Payback is not an economically sound method for evaluation of capital project.