Explain why, if two mutually exclusive projects are being compared

| March 31, 2017

Question
Explain why, if two mutually exclusive projects are being compared,the project

that generates most of its cash flows in the beginning of its life might have the

higher ranking under the NPV criterion if the required rate of return is high,

whereas the project that generates most of its cash flows toward the end of its

life might be deemed better if the required rate of return is low. Would changes

in a firm’s required rate of return ever cause a change in the IRR ranking of two

such projects? Explain.

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