You are analyzing two mutually exclusive projects using IRR. Project A has an IRR of 8.75% and Project B has an IRR of 9.12%. If the firm's appropriate discount rate is 9.45% and the annual inflation rate is expected to be 1.9%, then

Multiple Choice

• the firm should accept Project B because it has a higher IRR.

• Project A may likely have a large profitability index larger than Project B.

• the firm should reject both projects because both project NPVs are expected to be negative.

• the modified internal rate of return should be computed to further determine which project is more profitable for the firm.