Question: Global Enterprises is considering two new projects, Project C and Project D. Project Cash Flows and IRR: Project C0 ($ thousands) C1 ($ thousands) C2

Global Enterprises is considering two new projects, Project C and Project D.

Project Cash Flows and IRR:

Project

C0 ($ thousands)

C1 ($ thousands)

C2 ($ thousands)

IRR (%)

C

-90

40

50

22.00

D

-100

55

45

20.00

The discount rate is 12%.

Requirements:

  1. Illustrate why relying solely on IRR can be problematic.
  2. Compute the NPV for both projects.
  3. Recommend which project should be accepted based on NPV.
  4. Identify any potential risks associated with each project.

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