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The IRR of project X is 18%. The IRR of project Y is 17%. The company's...

The IRR of project X is 18%. The IRR of project Y is 17%. The company's cost of capital (cost of accessing funds to finance the projects) is 10%. If projects X and Y are independent and the company has enough funds to do both, which project (s) should they chose? If they are mutually exclusive, which do you chose?

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Answer #1

Answer:
In case projects are Independent:
In case the Project X and Y are independent, the Company will choose the projects whose IRR is more than the Company’s Cost of Capital. So, the Company will choose both the projects i.e. Project X and Project Y.

In case projects are mutually exclusive:
In case the Project X and Y are mutually exclusive, the Company will chose the project with higher IRR. So, the Company will choose Project X as its IRR is more than IRR of Project Y.

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