You are evaluating two mutually exclusive capital budgeting projects that have the following characteristics:
YEAR PROJECT A PROJECT B
0 ($4,000) ($4,000)
1 0 3,500
2 $5,000 1,100
IRR 11.8% 12.0%
If your required rate of return (k) is 10percent, which project should you choose, explain your answer?
C. Project A
D. Project B
E. None of the above
THESE ARE TWO MUTUALLY EXCLUSIVE PROJECT. IT MEANS THAT WE CAN CHOSE ONLY ONE OUT OF THESE TWO PROJECTS, THOUGH ...
This explains the evaluation of projects by IRR