ProjectC0 C1C2IRR (%) A-400+250+30023 B-200+140+17936 The opportunity cost of capital is 9%. Mr. Clotz is tempted to
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Question:
ProjectC0 C1C2IRR (%)
A-400+250+30023
B-200+140+17936
The opportunity cost of capital is 9%. Mr. Clotz is tempted to take B, which has the higher IRR.
Explain to Mr. Clotz why this is not the correct procedure.
Show him how to adapt the IRR rule to choose the best project.
Show him that this project also has the higher NPV.
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