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A Project Has Multiple IRRs

question 258

Essay

A project has multiple IRRs. Which should you use in determining whether or not to accept the project, the highest, the lowest, or the intermediate IRR?


Definitions:

Diminishing Marginal Utility

A principle stating that as a person consumes more of a good, the additional satisfaction or utility from consuming an additional unit decreases.

Total Utility

The total satisfaction received from consuming a particular quantity of goods or services.

Marginal Utility

The added satisfaction a consumer gets from having one more unit of a good or service.

Diminishing Marginal Utility

A principle in economics that posits an individual gains less satisfaction from consuming each additional unit of the same product or service.

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