Mr. Cyrus Clops, the president of Giant Enterprises, has to make a choice between two possible investments:

Cash Flows ($thousands)
Project	C0	C1	C2	IRR(%)
A	-450	+250	+300	14
B	-225	+120	+179	19.8

The opportunity cost of capital is 5%.

Mr. Clops is tempted to take B, which has the higher IRR.

However, Mr. Clops is wrong. Show him how to adapt the IRR rule to choose the best project Multiple Choice

a) Win this case project B has a higher IRR than project A. However, project B is half the size of project A. Mr. Clops can compute the incremental IRR (IIRR). Mr. Clops should take project A when the discount rate is less thant the IIRR= 7.7%

b) Win this case project B has a higher IRR than project A. However, project B is half the size of project A. Mr. Clops can compute the incremental IRR (IIRR). Mr. Clops should take project B when the discount rate is less thant the IIRR= 7.7%

c) Win this case project B has a higher IRR than project A. However, project B is half the size of project A. Mr. Clops can compute the incremental IRR (IIRR). Mr. Clops should take project B when the discount rate is less thant the IIRR= 10%

d) Win this case project B has a higher IRR than project A. However, project B is half the size of project A. Mr. Clops can compute the incremental IRR (IIRR). Mr. Clops should take project A when the discount rate is less thant the IIRR= 10%