Question: Consider two mutually exclusive projects of the same risk: Project A yr0 = -11,000; yr1 = 7,000; yr2 = 4,500; yr3 = 4,500 Project B

Consider two mutually exclusive projects of the same risk:

Project A

yr0 = -11,000; yr1 = 7,000; yr2 = 4,500; yr3 = 4,500

Project B

yr0 = -11,000,000; yr1 = 7,000,000; yr2 = 3,500,000; yr3 = 3,500,000

If the firm requires a return of 12%, what project should they select based on the IRR criterion? Is there any problem with this conclusion?

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