Question
Consider two investmentprojects, which both require an upfront investment of $ 10 million, and both of which pay a constant positive amount each year for
Consider two investmentprojects, which both require an upfront investment of $ 10 million, and both of which pay a constant positive amount each year for the next 8 years. Under what conditions can you rank these projects by comparing theirIRRs?
A.Ranking by IRR will work in this case so long as theprojects' cash flows do not decrease from year to year.
B.Ranking by IRR will work in this case so long as theprojects' cash flows do not increase from year to year.
C.Ranking by IRR will work in this case so long as the projects have the same risk.
D.There are no conditions under which you can use the IRR to rank projects.
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Analysis for Financial Management
Authors: Robert C. Higgins
12th edition
1259918963, 9781260140729 , 978-1259918964
