Stamset Company calculated after-tax cash flows, adjusted for the effects of inflation, for two mutually exclusive projects.

Question:

Stamset Company calculated after-tax cash flows, adjusted for the effects of inflation, for two mutually exclusive projects. Both projects have economic lives of 5 years. The results are as follows:

The company's cost of capital is 15%. Required:
(1) Determine the net present value for each project.
(2) Compute the internal rate of return for each project.
(3) Which project should be selected?

Net Present Value
What is NPV? The net present value is an important tool for capital budgeting decision to assess that an investment in a project is worthwhile or not? The net present value of a project is calculated before taking up the investment decision at... Internal Rate of Return
Internal Rate of Return of IRR is a capital budgeting tool that is used to assess the viability of an investment opportunity. IRR is the true rate of return that a project is capable of generating. It is a metric that tells you about the investment... Cost Of Capital
Cost of capital refers to the opportunity cost of making a specific investment . Cost of capital (COC) is the rate of return that a firm must earn on its project investments to maintain its market value and attract funds. COC is the required rate of...