Using the discounted cash flow yield (internal rate of return) for evaluating investment opportunities has the basic weakness that it does not give attention to the amount of the capital investment, in that a return of 20 per cent on an investment of £1000 may be given a higher ranking than a return of 15 per cent on an investment of £10 000.
Comment in general on the above statement and refer in particular to the problem of giving priorities to (ranking) investment proposals. Your answers should make use of the following information.

discounted cash flow yield (internal rate of return)">

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Project A cash flow Project B cash flow 10000 2300 2640 3040 3500 4020 Year 0 (Capital investments) 1 Cash flows 2 Cash flows 3 Cash flows 4 Cash flows 5 Cash flows 1000 240 288 346 414 498 Cost of capital 10% 10%