Question: Assume a firm is facing two mutually exclusive projects with following cash flow patterns. End of year Project C Project D Cash flows Cash flows

Assume a firm is facing two mutually exclusive projects with following cash flow patterns.

End of year Project C Project D

Cash flows Cash flows

Sh000 Sh000

0 -1,200 -1,200

1 1,000 100

2 500 600

3 100 1,080

Note that project Cs cash flows decrease while those of project D increase over time.

The IRR for projects are as follows

Project C - 33%

Project D - 17%

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