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Mutually exclusive projects irr cannot rank mutually

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Unformatted text preview: rowing 2. Mutually exclusive projects – IRR cannot rank mutually exclusive projects because it will not always give the same answer as the NPV rule in these cases 3. Multiple rates of return – when the sign of the cashflow stream changes more than once, then there is typically more than one IRR The profitability index is sometimes used to rank projects even when there is no soft or had capital rationing, which leads users to favor small projects over larger projects, which might have higher NPVs. Profitability index criteria should only be used when there is capital rationing. Chapter 11 Portfolio Return and Variance ( ( )) ( )) ( √ √ ( ( )) ( ( )) ( )) ( ( ( )) Expected Return and Variance () ( ( )) √ ( ( )) √( ( )) ( ( )) ( ( )) ( ( ))...
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