The IRR rule suffers from several drawbacks, one of which has to do with projects of "unconventional cashflows."

a. Use the table at the bottom of page 4 in the course workbook to create a plot of discount rate vs NPV (please review the Excel work we did in class for IRR.) You can choose your own range of discount rates.

b. What is the problem with applying the IRR rule to this case? Use your plot to answer this question.

NPV Payback IRR PI Project Initial Cashflow Investment per year A. Building factory $5 million $1.6 m B.Installing updates $2 million $0.75 m to the equipment Project length 5 Years 5 Years C.Developing new $11 million $3.25 m projects 5 Years NPV Payback IRR PI Project Initial Cashflow Investment per year A. Building factory $5 million $1.6 m B.Installing updates $2 million $0.75 m to the equipment Project length 5 Years 5 Years C.Developing new $11 million $3.25 m projects 5 Years