The following cash flows are provided for two mutually exclusive projects, Project A and Project B Project A requires an initial investment of $15,000 at time '0', and Project B needs an initial investment of $14,000 at time '0' Yearly Cash Flows Year 1 Project A $5,000 Project B $8,000 Year 2 Project A $6,000 Project B $5,000 Year 3 Project A $7,500 Project B $4,500 Year 4 Project A $6,000 Project B $3,500 Requirements (a) Calculate the NPV for each project using a discount rate of 10 (b) Determine which project should be accepted rejected (c) Discuss the accept reject decision if the projects were independent (d) Calculate the IRR for each project (e) Compare the NPV and IRR methods and discuss any differences in the decision making process

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Question: The following cash flows are provided for two mutually exclusive projects, Project A and Project B. Project A requires an initial investment of $15,000 at

The following cash flows are provided for two mutually exclusive projects, Project A and Project B. Project A requires an initial investment of $15,000 at time '0', and Project B needs an initial investment of $14,000 at time '0'.

Yearly Cash Flows

Year 1: Project A - $5,000; Project B - $8,000
Year 2: Project A - $6,000; Project B - $5,000
Year 3: Project A - $7,500; Project B - $4,500
Year 4: Project A - $6,000; Project B - $3,500

Requirements: (a) Calculate the NPV for each project using a discount rate of 10%. (b) Determine which project should be accepted/rejected. (c) Discuss the accept/reject decision if the projects were independent. (d) Calculate the IRR for each project. (e) Compare the NPV and IRR methods and discuss any differences in the decision-making process.

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