Question
Two new annuity-oriented projects are considered:
Project A: €1 m cost, 5-year CFs of €300k with MIRR 14%. Project B: €1 m cost, front-loaded CFs of €400k then lower, MIRR 13%. WACC = 10%, both positive NPVs, mutually exclusive. Which project should be chosen and why?Solution
For mutually exclusive projects, NPV drives decisions, not MIRR. Without NPV comparison, selection based on MIRR alone is insufficient.
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