Internal Rate of Return Projects A and B have the following cash flows:
Year | Project A | Project B |
0 | ‒$1,000 | ‒$2,000 |
1 | CIA | CIB |
2 | C2A | C2B |
3 | C3A | C3B |
a.If the cash flows from the projects are identical, which of the two projects would have a higher IRR? Why?
b.If C1B = 2C1A, C2B = 2C2A, and C3B = 2C3A, then is IRRA = IRRB?
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