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Unformatted text preview: 650 450 250 50 CFL (1,025) 100 300 500 700 IRR S 19.9% IRR L 15.7% So project S has a higher IRR. The value foregone depends on the NPV since the NPV is the value added. So now we calculate the NPV of the two projects using the NPV function NPV S 123.82 NPV L 104.20 Project S has a higher NPV than Project L In this case no value is foregone since based on IRR we selected the project with the higher NPV If the selected project by IRR had a lower NPV, then the difference between the NPV for the two project would be value foregone since we would have taken up the project with lower NPV and so lost the NPV of the higher project ts...
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This note was uploaded on 12/30/2010 for the course FIN 5405 taught by Professor Tapley during the Spring '08 term at University of Florida.
- Spring '08