12. IRR rule (S5.3) Cyrus Clops, the president of Giant Enterprises, has to make a choice between...
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12. IRR rule (S5.3) Cyrus Clops, the president of Giant Enterprises, has to make a choice between two possible investments:
Cash Flows ($000)
Project C0 C1 C2 IRR (%)
A –400 +250 +300 23 B –200 +140 +179 36 The opportunity cost of capital is 9%. Mr. Clops is tempted to take B, which has the higher IRR.
a. Explain to Mr. Clops why this is not the correct procedure.
b. Show him how to adapt the IRR rule to choose the best project.
c. Show him that this project also has the higher NPV.
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Kirti Kaushal
Having experience of more than 10 years is good enough to coach my students. Currently, I am working as an active supervisor of ACCA students. In my career, I helped students in financial accounting, management accounting, cost accounting, financial reporting, taxation, and audit. I also helped students publish their articles or papers in good journals. I also helped students with thesis and objective writing.
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Related Book For 
Principles Of Corporate Finance
ISBN: 9781264080946
14th Edition
Authors: Richard Brealey, Stewart Myers, Franklin Allen, Alex Edmans
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