Question: A company is considering two equally risky, mutually exclusive projects A and B. The cost of capital is 9%. The CEO wants to use the

A company is considering two equally risky, mutually exclusive projects A and B. The cost of capital is 9%. The CEO wants to use the IRR criterion, while the CFO favors the NPV method. If the CEO's preferred criterion is used, how much value will the firm lose as a result of this decision?

Year

Project A

Project B

0

-$4,000

-$2,000

1

2,000

1,000

2

2,100

1,100

3

2,200

1,200

4

2,300

1,300

1169.87

1102.45

1239.72

1312.13

1037.35

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