Assertion :When two or more investment proposals are mutually exclusive, ranking the proposals on the basis of IRR, NPV and PI methods may give contradictory results. Reason: The contradictory results in the ranking are due to differing dimensions relating to the scale of investments, cash flow patterns and project lives.

Both Assertion and Reason are correct and Reason is the correct explanation for Assertion

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Both Assertion and Reason are correct but Reason is not the correct explanation for Assertion

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Assertion is correct but Reason is incorrect

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Both Assertion and Reason are incorrect

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Solution

The correct option is C Assertion is correct but Reason is incorrect
For a single project, there is no conflict between $N P V$ , $I R R$ and $P I .$ But, for two or more exclusive projects, there may be conflict in ranking main reason for this contradiction is capital rationing or scarcity of funds.

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The correct option is C Assertion is correct but Reason is incorrectFor a single project, there is no conflict between NPV, IRR and PI. But, for two or more exclusive projects, there may be conflict in ranking main reason for this contradiction is capital rationing or scarcity of funds.