Suppose the following two independent investment opportunities are available to ABC Inc. The required return for both projects is 9 percent. If ABC Inc. applies the IRR decision rule, which project should it choose? Why or why not? Year

0

1

2

3

Project A

-$42,000

$15,300

$28,400

$7,500

Project B;

-$144,600

$35,900

$50,800

$45,000

Project B; The IRR exceeds the required return by about 1.97 percent. Project A; The IRR is less than the required return by about 2.47 percent.

Both; Both IRR exceed the required return.

Project A; The IRR exceeds the required return by about 2.47 percent.

Project B; The IRR is less than required return by about 1.97 percent.