Internal Rate of Return Projects A and B have the following cash fl ows:

Profi tability C0 C1 C2 Index NPV A $1,000 $1,000 $500 1.32 $322 B 500 500 400 1.57 285 Year Project A Project B 0 $1,000 $2,000 1 C1A C1B 2 C2A C2B 3 C3A C3B

a. If the cash fl ows from the projects are identical, which of the two projects would have a higher IRR? Why?

b. If C1B
2C1A, C2B
2C2A, and C3B
2C3A, then is IRRA
IRRB?

 LO.1