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Bill is considering two mutually exclusive projects with equivalent risk for his company.  In valuing the project...

Bill is considering two mutually exclusive projects with equivalent risk for his company.  In valuing the project #1, you calculate an IRR of 15%.  Before beginning the analysis of the project #2, you note the typical hurdle rate for a project of this risk level is 12%.  What return must be earned in order to select the second project?

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In independent projects IRR should be greater than Hurdle rate . But for mutually exclusive project the IRR of the higher project is chosen. Hence IRR of Project 2 should be greater than IRR of project 1.

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