Question
Your boss hands you the following information about two mutually exclusive projects. She adds the following: Our discount rate is 10% and both projects have
Your boss hands you the following information about two mutually exclusive projects. She adds the following: "Our discount rate is 10% and both projects have IRRs over 20%. Unfortunately, we are unable to implement both, so we will go with Project A since it has the highest IRR of the two. "How do you respond? Give supporting numerical analysis.
Project | Cost of Capital | IRR | Initial Cash flow | Cash Flow in One Year |
A | 10% | 560% | -$3000 | $19800 |
B | 10% | 21% | -170,000 | $205,700 |
Ranking the projects by IRR would lead to (correct/incorrect) decisions bc the NPV of project A is $__ and the NPV of project B is $___. This means that project (A/B) has the higher NPV, which results in The same/different projects being selected by the NPV and IRR rules.
This is the entire question. There is literally no more information I can add.
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