Consider two mutually exclusive projects, A and B. Project A requires an initial cash outlay of $100,000
Question:
a. Compute the IRR for each project.
b. Compute the NPV for each project for each of the following costs of capital: 0%, 4%, 8%, 12%, and 16%, and record your results in a table.
c. For which costs of capital do the IRR and NPV methods select the same project?
d. Examine the table created in part (b) and determine the costs of capital between which the methods begin to select different projects. Is your answer consistent with the result of part (a)? Explain your answer in terms of NPV profiles.
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