Question

Project A has an IRR of 23.4%. Project B has an IRR of 33.1%. The firm's cost of capital is 18%. Which project is better, A or B, or can't you tell?

Answer 1

If we are only deciding according to the internal rate of return, then, that project which have a higher amount of internal rate of return than cost of capital will be better for the company because it will be providing a higher rate of return so solely from the perspective of internal rate of return, project B will be better.

If we will be looking at an entire perspective of other decision making criteria and the overall amount of investment and the cost of capital involved then we will decide accordingly after looking at the amount of investment and the cost of capital so it will be decided after ascertainment of risk also hence,for a complete capital decision-making, we need other information to decide. So, THE CORRECT ANSWER WILL BE YOU CAN'T TELL