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:

Economies of Scale

Cost advantages reaped by companies when production becomes efficient, leading to a decrease in the per-unit cost as output increases.

Market Dominance

Market dominance refers to the situation where a company has a significant share of the total sales of a particular product or service, giving it substantial control over the market.

Herfindahl Index

The Herfindahl Index is a measure of the size of firms in relation to the industry and an indicator of the amount of competition among them, calculated by summing the squares of each firm's market share.

Clayton Act

A U.S. antitrust law enacted in 1914 to promote competition and prevent monopolies by prohibiting certain actions that could lead to anticompetitive practices.