Question: Consider the following two projects: Project Year 0 Cash Flow Year 1 Cash Flow Year 2 Cash Flow Year 3 Cash Flow Year 4 Cash

Consider the following two projects:

Project

Year 0

Cash Flow

Year 1

Cash Flow

Year 2

Cash Flow

Year 3

Cash Flow

Year 4

Cash Flow

Discount Rate

A

-100

40

50

60

N/A

15%

B

-73

30

30

30

30

15%

Assume that projects A and B are mutually exclusive.

  1. Find NPV for project A and project B.
  2. Find IRR for project A and project B.
  3. Based on results from part a and part b, which project should you accept?

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