You are evaluating two mutually exclusive projects: Project A and Project B. Both Project A and Project B are investment projects that each commence with initial up-front cash outflow followed by a series of constant annual cash inflows. Project A's IRR ("Internal Rate of Return") is 35%, while Project B's IRR is 30%. When present valuing the cash flows of the two projects using a discount rate of 20%, the two projects would have exactly the same positive NPV ("Net Present Value") as each other. Assume that both projects have identical risk levels. If the appropriate discount rate for projects of this level of risk is ____________, then _________________________________. which is true?
You are evaluating two mutually exclusive projects: Project A and Project B.
Both Project A and Project B are investment projects that each commence with initial up-front
Assume that both projects have identical risk levels.
If the appropriate discount rate for projects of this level of risk is ____________, then _________________________________.
which is true?
25% per annum; Project A should be rejected
10% per annum; both projects should be rejected
10% per annum; Project B should be accepted
25% per annum; Project B should be accepted
10% per annum; both projects should be accepted
25% per annum; both projects should be rejected
25% per annum; both projects should be accepted
10% per annum; Project A should be accepted
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