-If a project's size is doubled, its NPV will double. This is not the case with IRR. Thus, the IRR rule cannot be used to compare projects of different scales. Example 2.3 Initial Investment Cash Flow year 1 Annual Growth Rate Cost of Capital IRR NPV Bookstore $300,000 $63,000 3% 8% Coffee Shop $400,000 $80,000 3% 8%

-If a project's size is doubled, its NPV will double. This is not the case with IRR. Thus, the IRR rule cannot be used to compare projects of different scales. Example 2.3 Initial Investment Cash Flow year 1 Annual Growth Rate Cost of Capital IRR NPV Bookstore $300,000 $63,000 3% 8% Coffee Shop $400,000 $80,000 3% 8%

Name: If a project's size is doubled, its NPV will double. This is not the
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Description: If a project's size is doubled, its NPV will double. This is not the case with IRR. Thus, theIRR rule cannot be used to compare projects of different scales.Example 2.3Initial InvestmentCash Flow year 1Annual Growth RateCost of CapitalIRRNPVBookstor

Financial Management: Theory & Practice

16th Edition

ISBN:9781337909730

Author:Brigham

Publisher:Brigham

Chapter10: The Basics Of Capital Budgeting: Evaluating Cash Flows

Section: Chapter Questions

Problem 23SP: Start with the partial model in the file Ch10 P23 Build a Model.xlsx on the textbooks Web site....

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