Capital rationing The following projects are being evaluated by Grummett Company, which has $100,000 available for capital investment. The company's cost of capital is 16 percent. The available projects have the following costs and internal rates of return:

The company evaluates projects using the IRR method. The president says she wants the greatest possible IRR on capital projects. The vice president argues that he would prefer the greatest dollar return even if the IRR is less than optimal.

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Project Cost IRR A $10,000 20.0% B 20,000 18.5 CDE C 20,000 18.0 30,000 17.0 60,000 17.5