Does the IRR rule agree with the NPV rule in Problem 8? Timeline: Cash flows: Cost of capital: IRR: The IRR rule says to take the contract. The IRR rule agrees with the NPV rule. 8.00% 15 25 35

Does the IRR rule agree with the NPV rule in Problem 8 ? Timeline: Cach flows: Costofcapital:IRR:8.00% The IRR rule says to take the contract. The IRR rule agrees with the NPV rule. You are choosing between two projects, but can only take one. The cash flows for the project are given in the following table; Timeline: A B a. What are the IRR's of the two projects? b. If your discount rate is 5%, what are the NPY's of the two projects c. Why do IRR and NPV rank the two projects differently? a. IRR of Investmeat A: IRR of Investment B: b. NPV of Investment A at 5% : NPV ef lavestment B at 5% : c. NPF and IRR rank the two projects differently because they are measuring different things. NPV is measuring value creation, while IRR is measuring return on investment. Because feturns do not scale with differcnt fevels of investment, the two measures may give different ranking! when isitial investment is different