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Consider the following two mutually exclusive projects: What problem are you likely to encounter when using the IRR rule to evaluate the above two projects?

Consider the following two mutually exclusive projects:

What problem are you likely to encounter when using the IRR rule to evaluate the above two projects? Answer qualitatively and concisely. No calculations required.

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Project A Project B Initial Investment Cash Flow in 1 year Annual Growth Rate in Cash Flow (forever) Cost of Capital -250 +275 5% 10% -5000 +2000 2.5% 10%

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