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Consider two mutually exclusive projects A and B:
| | Cash Flows (dollars) | |
| Project | C0 | C1 | C2 | NPV at 12% |
| A | 35,500 | 25,400 | 25,400 | +$7,427 |
| B | 55,500 | 38,500 | 38,500 | +9,567 |
| |
a. Calculate IRRs for A and B. (Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places.)
b. Which project does the IRR rule suggest is best?
multiple choice 1
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Project A
-
Project B Incorrect
c. Which project is really best?
multiple choice 2
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Project A
-
Project B Correct
Answer & Explanation
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