Internal Rate of Return
Pitfall 3 - Mutually Exclusive Projects
w IRR sometimes ignores the magnitude of the
project.
w The following two projects illustrate that
problem.
20 , 000 35 , 000 75 11 , 818
10 , 000 20 , 000 100 8. 182
Project 0 @ 10 %
− + +
− + +
FE
C Ct IRR NPV