Question: A Company has identified the following two mutually exclusive projects: Year Cash Flows L Cash Flows S 0 $10,000 $10,000 1 200 5,000 2 500

  1. A Company has identified the following two mutually exclusive projects:

Year Cash Flows L Cash Flows S

0 $10,000 $10,000

1 200 5,000

2 500 6,000

3 8,200 500

4 4,800 500

  1. What is the IRR for each of these projects? If you apply the IRR decision rule, which project should the company accept? Is this decision necessarily, correct?

  2. If the required return is 9 percent, what is the NPV for each of these projects? Which project will you choose if you apply the NPV decision rule?

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