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Mr. Cyrus Clops, the president of Giant Enterprises, has to make a choice between two possible investments Project C0 C1 C2 C3 C4 IRR A -450 250 300 208 250 43% B -225 120 179 200 150 57% Mr. Clops is tempted to take B, which has the higher IRR. Show him how to adapt the IRR rule to choose the best project   Multiple Choice   WIn this case project B has a higher IRR than project A. However, project B is half the size of project A. Mr. Clops can compute the incremental IRR (IIRR). Mr. Clops should take project A when the discount rate is less thant the IIRR= 7%   WIn this case project B has a higher IRR than project A. However, project B is half the size of project A. Mr. Clops can compute the incremental IRR (IIRR). Mr. Clops should take project A when the discount rate is less thant the IIRR= 25.4%   WIn this case project B has a higher IRR than project A. However, project B is half the size of project A. Mr. Clops can compute the incremental IRR (IIRR). Mr. Clops should take project A when the discount rate is more thant the IIRR= 7%, and less than 43%   WIn this case project B has a higher IRR than project A. However, project B is half the size of project A. Mr. Clops can compute the incremental IRR (IIRR). Mr. Clops should take project A when the discount rate is more thant the IIRR= 25.4% and less than 43%   WIn this case project B has a higher IRR than project A. However, project B is half the size of project A. Mr. Clops can compute the incremental IRR (IIRR). Mr. Clops should take project A when the discount rate is more thant the IIRR= 25.4%  and less than 57%

Mr. Cyrus Clops, the president of Giant Enterprises, has to make a choice between two possible investments Project C0 C1 C2 C3 C4 IRR A -450 250 300 208 250 43% B -225 120 179 200 150 57% Mr. Clops is tempted to take B, which has the higher IRR. Show him how to adapt the IRR rule to choose the best project   Multiple Choice   WIn this case project B has a higher IRR than project A. However, project B is half the size of project A. Mr. Clops can compute the incremental IRR (IIRR). Mr. Clops should take project A when the discount rate is less thant the IIRR= 7%   WIn this case project B has a higher IRR than project A. However, project B is half the size of project A. Mr. Clops can compute the incremental IRR (IIRR). Mr. Clops should take project A when the discount rate is less thant the IIRR= 25.4%   WIn this case project B has a higher IRR than project A. However, project B is half the size of project A. Mr. Clops can compute the incremental IRR (IIRR). Mr. Clops should take project A when the discount rate is more thant the IIRR= 7%, and less than 43%   WIn this case project B has a higher IRR than project A. However, project B is half the size of project A. Mr. Clops can compute the incremental IRR (IIRR). Mr. Clops should take project A when the discount rate is more thant the IIRR= 25.4% and less than 43%   WIn this case project B has a higher IRR than project A. However, project B is half the size of project A. Mr. Clops can compute the incremental IRR (IIRR). Mr. Clops should take project A when the discount rate is more thant the IIRR= 25.4%  and less than 57%

Essentials Of Investments
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
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Mr. Cyrus Clops, the president of Giant Enterprises, has to make a choice between two possible investments

Project C0 C1 C2 C3 C4 IRR
A -450 250 300 208 250 43%
B -225 120 179 200 150 57%

Mr. Clops is tempted to take B, which has the higher IRR.

Show him how to adapt the IRR rule to choose the best project

 

Multiple Choice
  •  
    WIn this case project B has a higher IRR than project A. However, project B is half the size of project A. Mr. Clops can compute the incremental IRR (IIRR). Mr. Clops should take project A when the discount rate is less thant the IIRR= 7%
  •  
    WIn this case project B has a higher IRR than project A. However, project B is half the size of project A. Mr. Clops can compute the incremental IRR (IIRR). Mr. Clops should take project A when the discount rate is less thant the IIRR= 25.4%
  •  
    WIn this case project B has a higher IRR than project A. However, project B is half the size of project A. Mr. Clops can compute the incremental IRR (IIRR). Mr. Clops should take project A when the discount rate is more thant the IIRR= 7%, and less than 43%
  •  
    WIn this case project B has a higher IRR than project A. However, project B is half the size of project A. Mr. Clops can compute the incremental IRR (IIRR). Mr. Clops should take project A when the discount rate is more thant the IIRR= 25.4% and less than 43%
  •  

    WIn this case project B has a higher IRR than project A. However, project B is half the size of project A. Mr. Clops can compute the incremental IRR (IIRR). Mr. Clops should take project A when the discount rate is more thant the IIRR= 25.4%  and less than 57%

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