Ranking Using Incremental IRR

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Ranking Using Incremental IRR

• Arrange investment alternative in ascending order
  of Initial outlay
• Analyze the first pair of alternatives starting
  with the smallest IO and the next largest IO. The
  smallest IO will be the defender and the next
  largest IO will be the challenger. The project
  that comes out ahead becomes the defender against
  the next challenger
• Continue the process until all the comparisons
  have been made

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Incremental IRR Example
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RANKINGS

• NPV IRR
• A B
• C A
• B C
• D D

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Step 1 Rearrangement in order of increasing IO
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Step 2 Establish 1st Pair
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INCRIMENTAL IRR
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RANKINGS

• NPV IRR ?IRR
• A B A
• C A C
• B C B
• D D D