You are trying to determine whether to accept project A or project B.These projects are mutually exclusive.As part of your analysis, you should compute the incremental IRR by determining:
A)the internal rate of return for the cash ﬂows of each project.
B)the net present value of each project using the internal rate of return as the discount rate.
C)the discount rate that equates the discounted payback periods for each project.
D)the discount rate that makes the net present value of each project equal to 1.
E)the internal rate of return for the differences in the cash ﬂows of the two projects.

Question

Quizplus · Accepted Answer

To determine which project to accept, we should compute the incremental IRR, which is the internal rate of return for the differences in the cash flows of the two projects. This will tell us the rate of return of choosing one project over the other. Therefore, the correct choice is E.

You Are Trying to Determine Whether to Accept Project a or Project