Internal Rate of Return Projects A and B have the following cash flows:
Year Project A Project B
0 2$1,000 2$2,000
1 C1A C1B
2 C2A C2B
3 C3A C3B
a. If the cash flows from the projects are identical, which of the two projects would have
a higher IRR? Why?
b. If C1B 5 2C1A, C2B 5 2C2A, and C3B 5 2C3A, then is IRRA 5 IRRB?