Internal Rate for Return (IRR) for Mutually Exclusive Project
Mutually exclusive project is different from independent project. For mutually exclusive project, we can accept project A or B or deny both, but we cannot accept both projects.
We may solve mutually exclusive projects using IRR with following way:
- Compute incremental IRR solved via cash flows from project A minus project B,
- If incremental IRR > discount rate, so choose project A.
Source:
- Phnom Penh HR
- Mcgraw-Hill – Fundamentals Of Corporate Finance