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When should you use incremental PI and incremental IRR? a) When projects are of different size....

When should you use incremental PI and incremental IRR?

a) When projects are of different size.

b) When choosing between identically sized, mutually exclusive projects.

c) When there are negative future cash flows for a project.

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Answer #1

Answer is a

Incremental IRR and incremental PI are methods to asess the financial return when there are two competing projects available for investment and both these projects involve different amounts of initial investment. This is the option in statement a.

These two methods are different from the conventional methods of PI and IRR, where they can be used for assessment of one or more projects. The traditional IRR and PI methods can be used for b and c statements/options.

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