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State the compatible one-period examples
| Project | Time-zero flow | Time-one receipt | IRR |
|---|---|---|---|
| A | −100 | 140 | 40% |
| B | −1,000 | 1,200 | 20% |
Calculate both NPVs at ten percent
A has NPV 27.272727; B has NPV 90.909091. Their one-period IRRs follow directly from receipt divided by initial outlay minus one.
Retain the feasibility assumptions
Under the simplified comparison, both proposals are feasible individually, only one can be selected, and their rate and risk assumptions are treated as compatible. Those are exercise conditions; a budget that cannot fund B changes the feasible alternatives.
Explain the conflict without an invented reinvestment
Each schedule has only one future receipt, so no interim receipt needs a reinvestment story. The rate comparison and absolute value comparison differ because of scale. The larger modeled NPV does not prove a real proposal’s forecast or risk assumptions.