**Please explain using Excel to solve and explain the answer thoroughly. Show formulas.

Mr. Cyrus Clops, the president of Giant Enterprises, has to make a choice between two possible investments:

Cash Flows ($thousands)
Project	C0	C1	C2	IRR(%)
A	-400	+250	+300	23
B	-200	+140	+179	36

The opportunity cost of capital is 5%.

Mr. Clops is tempted to take B, which has the higher IRR.

Why should not Mr. Clops base his decision on the IRR?

Multiple Choice

A. When projects have different sizes (very different cash flows in year 0), the IRR may give the wrong solution.In this case project B has a higher IRR than project A. However, project B is half the size of project A.

The NPV gives the right choice. In this case the NPV of Project B is $180 > $60 the NPV of Project B

B. When projects have different sizes (very different cash flows in year 0), the IRR may give the wrong solution.In this case project B has a higher IRR than project A. However, project B is half the size of project A.

The NPV gives the right choice. In this case the NPV of Project B is $120 > $90 the NPV of Project A

C. When projects have different sizes (very different cash flows in year 0), the IRR may give the wrong solution.In this case project B has a higher IRR than project A. However, project B is half the size of project A.

The NPV gives the right choice. In this case the NPV of Project A is $110 > $96 the NPV of Project B Correct

D. When projects have different sizes (very different cash flows in year 0), the IRR may give the wrong solution.In this case project B has a higher IRR than project A. However, project B is half the size of project A.

The NPV gives the right choice. In this case the NPV of Project A is $150 > $50 the NPV of Project B