Question
The following are two independent projects that you are evaluating. The first project has cash flows of $161,900, $60,800, $162,300, and -$75,000 for Years 0
The following are two independent projects that you are evaluating. The first project has cash flows of $161,900, $60,800, $162,300, and -$75,000 for Years 0 to 3, respectively. The second project has cash flows of $175,600, $261,800, -$165,000, $145,000 and -$75,000. Which of these, best summarizes your situation?
A. Project 1 has 2 IRRs and Project 2 has 2 IRRs. Therefore, we should not use IRR to evaluate the projects.
B. Project 1 has 1 IRR and Project 2 has 2 IRRs. Therefore, we should use IRR only to evaluate Project 1.
C. Project 1 has 2 IRRs and Project 2 has 3 IRRs. Therefore, we should not use IRR to evaluate the projects.
D. Project 1 has 3 IRRs and Project 2 has 4 IRRs. Therefore, we should not use IRR to evaluate the projects.
E. None of the above is correct.
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