PART A:

Three sisters & Co. is considering projects S and L, whose cash flows are shown below. these projects are mutually exclusive, equally risky and not repeatable. if the decision is made by choosing the project with the higher IRR, how much value will be forgone? note that no change in value may exist if there is no conflict in decisions, that is choosing same project under both methods. furthermore, projects could also have been rejected in the very first place.

WACC: 9.0%

Year Cash Flow (S) Cash Flow (L)

0 -$1,100 -$1,000

1 $600 $200

2 $500 $500

3 $250 $200

4 $50 $500

A. $13.21

B. -$60.00

C. -$13.21

D. $0.00

E. -$24.41

F. $60.00

G. $24.41

PART B:

Three sisters & Co. is considering projects S and L. however company has lost investment information for project L. payback period for both projects are the same. the cash flows for both the projects are shown below. what is the IRR of the project with higher NPV?

WACC: 10.0%

Year Cash Flow (S) Cash Flow (L)

0 -$900 -$X

1 $250 $400

2 $300 $350

3 $350 $300

4 $400 $250

A. 13.65%

B. 11.52%

C. 9.95%

D. 15.16%

E. 14.0%