Two mutually exclusive projects have the same IRR.When will you be indifferent between them?
A) When the IRR is equal to the cost of capital.
B) Always if they have the same IRR.
C) When the IRR is less than the cost of capital.
D) When there is only one change in the sign of the cash flows.

Question

Quizplus · Accepted Answer

When two mutually exclusive projects have the same IRR, the decision for selecting one over the other is based on the comparison of their net present value (NPV) at the cost of capital, which represents the opportunity cost of investing capital in a project. Therefore, when the IRR is equal to the cost of capital, the NPV of both projects will be zero and they will produce the same value. Thus, the decision between them will be indifferent.

Two Mutually Exclusive Projects Have the Same IRR