1.- You are choosing between two projects. The cash flows for the projects are given in the following table ($ million):

Project	Year 0	Year 1	Year 2	Year 3	Year 4
A	$48	$26	$19	$19	$15
B	$101	$22	$42	$48	$61

a. What are the IRRs of the two projects?

b. If your discount rate is 5.1%, what are the NPVs of the twoprojects?

c. Why do IRR and NPV rank the two projects differently?

2.- You are deciding between two mutually exclusive investment opportunities. Both require the same initial investment of $9.6 million.

Investment A will generate $2.15 million per year (starting at the end of the first year) in perpetuity. Investment B will generate $1.57

million at the end of the first year, and its revenues will grow at 2.8% per year for every year after that.

a. Which investment has the higher IRR?

investment A___ Investment B___

b. Which investment has the higher NPV when the cost of capital is 5.5%?

c. In this case, when does picking the higher IRR give the correct answer as to which investment is the best opportunity?