Flint Fruits is considering two equally risky, mutually exclusive projects, Projects A and B, that have the
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- Flint Fruits is considering two equally risky, mutually exclusive projects, Projects A and B, that have the following cash flows:
Year | Project A | Project B |
0 | -$100,000 | -$105,000 |
1 | 40,000 | 30,000 |
2 | 25,000 | 15,000 |
3 | 70,000 | 80,000 |
4 | 32,500 | 55,000 |
(a) What is the cost of capital that would make the two projects having exactly the same NPV values?
(b) Discuss how this cost of capital that would make two projects have the same NPV value would influence your decision to take project A or project B based on NPV versus IRR method?
Related Book For
Understanding financial statements
ISBN: 978-0136086246
9th Edition
Authors: Lyn M. Fraser, Aileen Ormiston
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