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lopic: Equivalent annual costs ProjectsA and B arem tually exclus ve le nding projects. P oject A has an IRR of20% while Project B h san lRR of 30% You would be more likely to choose B unless 95 A. Project B has a longer life than Project A. B. Project A has more risk than Project B. C. Project A is twice the size of Project B. D. Project B has a larger cash inflow in Year 1 than Project A.
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Answer #1

Option C is correct

If the size of Project A is larger, it will probably have larger NPV in dollar terms even though the IRR is lesser.

A is incorrect since the life is considered only in payback method.

B is incorect since lesser risk will induce one to select project B

D is incorrect since it is beneficial if Project B has higher cash flows earlier than A.

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