Here are the cash flows for two mutually exclusive projects:

Project	C0	C1
A	-$100	$130
B	-$200	$240

a. What is the IRR of each project?

b. At what discount rate are you indifferent between the two projects?

c. For what range of discount rates would you choose project A and for what range of discount rates would you choose project B?

You are deciding between two mutually exclusive investment opportunities.

Project A requires an investment of $1,000 at t = 0 and generates a perpetual cash flow of $150 starting at t = 1.

Project B requires an investment of $1,000 at t = 0 and generates a cash flow of $60 at t = 1. After t = 1 the cash flow grows at the rate of 4% in perpetuity (so the cash flow at t = 2 is 4% higher than the cash flow at t = 1, the cash flow at t = 3 is 4% higher than the cash flow at t = 2 and so on).

a. Which investment has the higher IRR?

b. Which investment has the higher NPV when the cost of capital is 6%?

c. Which investment should you pick (if any) if the cost of capital is 6%? d. For what range of values for the opportunity cost of capital would you make the opposite decision, compared to part c?