Question: Problem 3. (25 marks) A company is analyzing two mutually exclusive projects, S and L, with the following cash flows: 1 2 3 + +

Problem 3. (25 marks) A company is analyzing two mutually exclusive projects, S and L, with the following cash flows: 1 2 3 + + + Projects - $1,000 $870 $250 $25 $25 Project L --$1,000 $0 $250 $400 $845 The company's WACC is 8.5%. What is the IRR of the better project if they are mutually exclusive? (Hint: The better project may or may not be the one with the higher IRR.)

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