Question: QUESTION 2: (20 MARKS) Two projects (A and B) have the following net cash flows for a four year period: Year 0 1 2 3

QUESTION 2: (20 MARKS) Two projects (A and B) have the

QUESTION 2: (20 MARKS) Two projects (A and B) have the following net cash flows for a four year period: Year 0 1 2 3 4 Project A (000 Pula) -25,000.00 6,000.00 8,000.00 10,000.00 12,000.00 Project B (000 Pula) -25,000.00 12,000.00 10,000.00 6,000.00 4,000.00 Using the Internal Rate of Return (IRR) approach, determine which project to select for implementation: i. Define Internal Rate of Return (IRR) (1 Mark) ii. Write down and explain the IRR formula (3 Marks) Determine the IRR for Project A (6 Marks) iv. Determine the IRR for Project B (6 Marks) What is the decision criterion? (2 Marks) Based on the criterion, which of the two projects do you select (2 Marks) 111. V1

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