medium · Principles of Finance

In a case of 'mutually exclusive projects' with different timing (e.g., one front-loaded, one back-loaded), the IRR might favor:

1. The project that requires the least amount of debt financing.
2. The project with the highest terminal value at the end of twenty years.
3. Neither, as IRR is identical for any two projects with the same total nominal cash flow.
4. The project with earlier cash flows, especially if the cost of capital is low.

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