Short Notes:

These are numerical questions, you can answer them using either mathematical formula (if possible) or financial calculator. No matter what method you use, you need to show the calculation steps (for math formula) or function buttons that you click. Showing no steps will be discounted significantly.

Question 3 (10 points)

Mary Inc. is considering mutually exclusive Projects A and B, whose cash flows are shown below. If the decision is made by choosing the project with the higher IRR, will there be any value loss due to the IRR-based decision? If there is a loss, how much value will be forgone? The WACC is assumed to be 9.5%.

WACC: Year	9.5%	0	1	2	3	4
CFA		$2,020	$730	$730	$740	$740
CFB		$4,100	$1,400	$1,500	$1,520	$1,530