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Assume you have analyzed two projects for Able Company, Project C and Project D. Project C has a NPV of $12,455, an IRR of 14.3%
Assume you have analyzed two projects for Able Company, Project "C" and Project "D". Project "C" has a NPV of $12,455, an IRR of 14.3% and a MIRR of 12.3%. Project "D" has a NPV of $11,944, an IRR of 14.95%, and a MIRR of 11.94%. Projects "C" and "D" are mutually exclusive. Able Company's WACC is 11%. The What is your decision regarding Projects "C" and "D". O a. You would choose Project "C" because it has a higher NPV and MIRR than Project "D", indicating that the returns of Project "C" are higher. Ob. You would choose Project "D" because it has a higher IRR than Project "C", indicating that the returns of Project "D" are higher. You would choose Project "C" because it has a higher NPV and MIRR than Project "D", and because of the reinvestment assumption of the NPV and MIRR " methods, NPV and MIRR are more reliable measures of return than is IRR. You would choose Project "D" because it has a higher IRR than Project "C", and because of the reinvestment assumption of the IRR method, IRR is a more reliable measure of return than NPV and MIRR. You would not choose either Project "C" or "D", because both Projects have IRR's and MIRR's that are greater than the WACC, indicating that the costs of both Projects exceed their investment given the cost of capital
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