Problem 1 A firm has analyzed three potential projects and listed the estimated cash flows in Table 1 below Please calculate the NPV and IRR of each project to complete the table, and use the information to answer the questions Table 1 Estimated Cash Flows of Three Projects Project A Project B Project C Required Return 10 8 10 Initial Investment at 0 100000 20000 200000 CF at Year 1 30000 6000 85000 CF at Year 2 40000 6000 80000 CF at Year 3 50000 6000 75000 CF at Year 4 60000 6000 70000 NPV IRR a If the projects are not mutually exclusive, which project(s) should the firm invest in Why b If the projects are mutually exclusive, which project should the firm choose Why

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Question: Problem 1 A firm has analyzed three potential projects and listed the estimated cash flows in Table 1 below. Please calculate the NPV and IRR

Problem 1

A firm has analyzed three potential projects and listed the estimated cash flows in Table 1 below. Please calculate the NPV and IRR of each project to complete the table, and use the information to answer the questions.

Table 1. Estimated Cash Flows of Three Projects

Project A

Project B

Project C

Required Return

10%

Initial Investment at 0

-100000

-20000

-200000

CF at Year 1

30000

6000

85000

CF at Year 2

40000

6000

80000

CF at Year 3

50000

6000

75000

CF at Year 4

60000

6000

70000

NPV

IRR

a.If the projects are not mutually exclusive, which project(s) should the firm invest in? Why?

b.If the projects are mutually exclusive, which project should the firm choose? Why?

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