Question: Thomas Company is considering two mutually exclusive projects. The firm, which has a cost of capital of 13%, has estimated its cash flows as shown
Thomas Company is considering two mutually exclusive projects. The firm, which has a cost of capital of 13%, has estimated its cash flows as shown in the following table:
a.Calculate the NPV of each project and assess its acceptability.
b.Calculate the IRR for each project and assess its acceptability.
| Project A | Project B | |
| Initial investment (CF0) | $120,000 | $69,000 |
| Year (t) | Cash inflows (CFt) | |
| 1 | $25,000 | $40,000 |
| 2 | $40,000 | $25,000 |
| 3 | $30,000 | $15,000 |
| 4 | $45,000 | $5,000 |
| 5 | $50,000 | $20,000 |
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