Question: { Handwritten submittals will not be accepted } Situation: A firm has a capital budget of $100, which must be spent on one of two

{ Handwritten submittals will not be accepted }

Situation: A firm has a capital budget of $100, which must be spent on one of two projects, each requiring a present outlay of $100. Project A yields a return of $120 after one year, whereas Project B yields $201.14 after 5 years.

Questions:

  • What is the NPV of each project using a discount rate of 10%?
  • What is the IRR of each project?
  • What are the project rankings based on these two investment decision rules?

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