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    Question

    Mutually exclusive projects: A (NPV=₹200, IRR=18%), B

    (NPV=₹250, IRR=15%). Cost of capital=12%. Which to select?
    A Project A Correct Answer Incorrect Answer
    B Project B Correct Answer Incorrect Answer
    C Both Correct Answer Incorrect Answer
    D Neither Correct Answer Incorrect Answer

    Solution

    For mutually exclusive projects, select based on NPV as it gives absolute value addition. Both IRRs > cost of capital, but B has higher NPV.

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