Question: 11. Donner Inc. is considering Projects S and L, whose cash flows are shown below. These projects are mutually exclusive. The CEO wants to use

11. Donner Inc. is considering Projects S and L, whose cash flows are shown below.

These projects are mutually exclusive. 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?

WACC: 6.75% End of Year Project S Project L 0 -$1,025 -$2,150 1 $380 $765 2 $380 $765 3 $380 $765 4 $380 $765 a. $214.44 b. $186.47 c. $218.17 d. $182.74 e. $220.03

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