$1)$ Explain the decision criteria for Net Present Value analysis.

$2)$ Explain the decision criteria for Internal Rate of Return analysis.

$3)$ Complete the following problem. Walk through your calculations and your recommendation to the CEO for acceptance$/$rection of projects.

A firm is considering Projects S and L$,$ whose cash flows are shown below. These projects are mutually exclusive, equally risky, and not repeatable. The CEO wants to use the IRR criterion, while the CFO favors the NPV method. You were hired to advise the firm on the best procedure. If the wrong decision criterion is used, how much potential value would the firm lose?

Project S Project L

WACC $6\mathrm{.}55\%6\mathrm{.}55\%$

Initial Cost $($$$1,100($$$2100)$

Year $1$ $$405$ $$720$

Year $2$ $$405$ $$720$

Year $3$ $$405$ $$720$

Year $4$ $$405$ $$720$