Capital Constraint

Capital Constraint - IRRs. Example: (- + + - + +) IRR is a...

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Many firms operate in  Capital- Constraint  Environments. IRRs cannot be directly compared  across projects.   Therefore, IRR  cannot  be used to choose between  mutually-exclusive projects! To  maximize   value of the firm,  you need to use NPV to select the  combination of projects that yield  the greatest $$$ for owners of  firm. IRR is a good decision-making  tool as long as cash flows are  conventional   Example:  (- + + + + +) Problem:   If there are  multiple   sign changes  in the cash flow 
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stream, we could get multiple 
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Unformatted text preview: IRRs. Example: (- + + - + +) IRR is a good decision-making tool as long as cash flows are conventional . Example: (- + + + + +) Problem: If there are multiple sign changes in the cash flow stream, we could get multiple IRRs. Example: (- + + - + +) Problem: If there are multiple sign changes in the cash flow stream, we could get multiple IRRs. Example: (- + + - + +) We could find three DIFFERENT IRRs!...
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Capital Constraint - IRRs. Example: (- + + - + +) IRR is a...

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