NPV for project AB is 1413.29 NPV for project STis 1312.20 the require

QUESTION

NPV for project AB is 1413.29 NPV for project STis 1312.20 the required return is %10What is the IRR for each of these projects? If you apply the IRRdecision rule, which project should the company accept? Isthe decision necessarily correct?
Answer: IRR for each of these projects: IRR of both the projects can not be calculated without knowingcash flows, no one can calculate IRR from a single NPV figure, tocalculate IRR we need cash flows, only discount rate and NPV arenot enough to calculate IRR. Company should accept the Project: As we know that, IRR is that discount rate which makes NPV equalsto zero, so if a project has higher NPV then that project requirehigher amount of Internal Rate of Return (IRR), as in

s exampleProject AB has NPV of $1413.29, so it will have higher IRR thanProject ST, who has lower NPV of $1312.20 than Project ABsNPV. IRR of both projects will be greater than discount rate, andthe discount rate if 10% so IRR of both projects will be greaterthan 10%, lets say 16% for Project AB and 15% for Project ST.

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