Question: Consider the following two projects with the indicated cash flows: Project Year 0 Year 1 Year 2 Year 3 Year 4 Discount Rate A -100

Consider the following two projects with the indicated cash flows:

Project Year 0 Year 1 Year 2 Year 3 Year 4 Discount Rate

A -100 40 50 60 N / A .15

B -73 30 30 30 30 .15

1. What are the NPVs of the two projects? Which project will you accept based on NPV rule?

2. What are the IRRs of the two projects? Which project will you accept based on the IRR rule?

3. What is an incremental IRR of Project B over Project A?

4. What are the profitability indexes for Project A and Project B, respectively? And which project will you accept based on the profitability index

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