11-4 Explain why, if two mutually exclusive projects are being compared, the sho

Question

11-4 Explain why, if two mutually exclusive projects are being compared, the short-term project might have the higher ranking under NPV criterion if the cost of capital is high, but the long-term project might be deemed better if the cost of capital is low. Would changes in the cost of capital ever cause a change in the IRR ranking of two such projects?
In what sense is a reinvestment rate assumption embodied in the NPV, IRR, and MIRR methods?What is the assumed reinvestment rate of each method?

Explanation / Answer

if cost of capital is high than it is needed that the revenues recieved are not very lest than tha NPV values of them.. ie. if too many years latter a revenue is recived as in long term project than its NPV=cashflow(1+r/100)^(-n) is very less , and there fore not profitable as comapred to short term project. changes in capital cost , do change the IRR since IRR is the discount rate at which sum of all NPV of cash flows becom equal to capital cost

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