Question: Highflyer plc has two possible projects to consider. It cannot do both - they are mutually exclusive. The cash flows are: Highflyer's cost of capital

Highflyer plc has two possible projects to consider. It cannot do both - they are mutually exclusive. The cash flows are:

Highflyer's cost of capital is 12 per cent. Assume unlimited funds. These are the only cash flows associated with the projects.
a. Calculate the internal rate of return (IRR) for each project.
b. Calculate the net present value (NPV) for each project.
c. Compare and explain the results in (a) and (b) and indicate which project the company should undertake and why.

Points in time (yearly intervals) Project A Project B -420,000 150,000 150,000 150,000 150,000 -100,000 75,000 75,000 0

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