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A project shows internal rates of return of 8 and 34 per cent. The analyst should

  • A.report the average of 21 per cent
  • B.report the present worth at the required rate instead
  • C.report 34 per cent as the project's return
  • D.report 8 per cent as the conservative figure

Answer: B

Correct answer: report the present worth at the required rate instead

Two roots mean neither is the project’s rate of return, and averaging them produces a number with no interpretation at all. The present worth at the minimum attractive rate is unambiguous and answers the question actually being asked, which is whether the project is worth doing.

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