Two Mutually Exclusive Projects Have the Same IRR

question 94

Multiple Choice

Two mutually exclusive projects have the same IRR.When will you be indifferent between them?

• A) When the IRR is equal to the cost of capital.
• B) Always if they have the same IRR.
• C) When the IRR is less than the cost of capital.
• D) When there is only one change in the sign of the cash flows.

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Definitions:

Conditional Probability (P(B | A))

The probability of an event B occurring given that event A has already occurred.

Mutually Exclusive

Describes events that cannot occur at the same time, meaning the occurrence of one event excludes the possibility of the other event happening.

P(A ∩ B)

The probability of the intersection of events A and B, representing the likelihood that both events occur simultaneously.

P(A ∪ B)

Represents the probability of the occurrence of at least one of two events, A or B, including the case where both events occur simultaneously.