Consider two investment projects, which both require an upfront investment of $1

Question

Consider two investment projects, which both require an upfront investment of $10 million, and both of which pay a constant positive amount each year for the next 12 years. Under what conditions can you rank these projects by comparing their IRRs? (Select the best choice below.) A. There are no conditions under which you can use the IRR to rank projects. B. Ranking by IRR will work in this case so long as the projects have the same risk. C. Ranking by IRR will work in this case so long as the projects' cash flows do not increase from year to year. D. Ranking by IRR will work in this case so long as the projects' cash flows do not decrease from year to year.

Explanation / Answer

ans is B Ranking by IRR will work in this case as long as the projects have the same risk.

because here the return, year and initial investment all are same hence their cost of capital is same they can be compared.

Related Questions

Navigate

• Browse (All)
• Browse C
• Subjects

---