Which decision rule - IRR or NPV - would you use to make a capital budgeting decision between Project A and Project B? (b) What are your reasons for choosing that rule?

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A 1 2 Year 3 4 5 6 7 8 9 Internal Rate of Return 10 IRR Guess 0 11 IRR Guess 1 12 Net Present Value at Rate of... 13 5% 14 10% 15 15% B Cash Flows Project A 0 $ 1 $ 2 $ 3 $ 4 $ 5 $ с Project B (15,000) $ 4,600 $ 4,600 $ 4,600 $ 4,600 $ 4,600 $ (15,000) 10,000 15,000 20,000 10,000 (50,000) D E F G A 1 2 Year 3 4 5 6 7 8 9 Internal Rate of Return 10 IRR Guess 0 11 IRR Guess 1 12 Net Present Value at Rate of... 13 5% 14 10% 15 15% B Cash Flows Project A 0 $ 1 $ 2 $ 3 $ 4 $ 5 $ с Project B (15,000) $ 4,600 $ 4,600 $ 4,600 $ 4,600 $ 4,600 $ (15,000) 10,000 15,000 20,000 10,000 (50,000) D E F G

Answer rating: 100% (QA)

To make a capital budgeting decision between Project A and Project B we need to determine which decision rule Internal Rate of Return IRR or Net Prese... View the full answer