Problem 6: Knowing that the IRR for 4 projects are 16.94%, 12.69%, 14.33% and 14.81% and...
Problem 6: Knowing that the IRR for 4 projects are 16.94%, 12.69%, 14.33% and 14.81% and there is an annual inflation rate of 5%. What are the IRR's of the projects after the inflation? and which project is better?
Homework Answers
Inflation is 5%
IRR after inflation is IRR before inflation - 5%
IRR1=16.94%-5%=11.94%
IRR2=12.69%-5%=7.69%
IRR3=14.33%-5%=9.33%
IRR4=14.81%-5%=9.81%
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a) Neither
b) Project A
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If the projects were mutually exclusive, which project(s) would
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a) Neither
b) Project A
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d) Both Projects A or B
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