Question: Refer to homework problem P10-25 from the textbook to answer this question. P1025 All techniques with NPV profile: Mutually exclusive projects Projects A and B,
Refer to homework problem P10-25 from the textbook to answer this question.
P1025 All techniques with NPV profile: Mutually exclusive projects Projects A and B, of equal risk, are alternatives for expanding Rosa Companys capacity. The firms cost of capital is 13%. The cash flows for each project are shown in the following table.
a. Draw the net present value profiles for both projects on the same set of axes, and discuss any conflict in ranking that may exist between NPV and IRR. b. Summarize the preferences dictated by each measure, and indicate which project you would recommend. Explain why.
| Project A | Project B | |
| initial investment | -$80,000 | -$50,000 |
| year (t) | Cash inflows | Cash inflows |
| 1 | $15,000 | $15,000 |
| 2 | 20,000 | 15,000 |
| 3 | 25,000 | 15,000 |
| 4 | 30,000 | 15,000 |
| 5 | 35,000 | 15,000 |
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