Projects A and B both have normal (conventional) cash flows. A's IRR is 7% and B's IRR is 8%. If projects A and B are mutually exclusive, you should select:
Click on the arrows to vote for the correct answer
A. B. C. D.C
If you were to use the IRR rule, you would select project B if the project's cost of capital were greater than 8%. However, you should always use the NPV criterion for selecting projects. Even though B has a higher IRR, it could have a lower NPV at the project's cost of capital. Since this information is missing, you cannot say for sure whether project A is preferable or project B. Indeed, you don't even know if either of the projects has a positive NPV!