Question: You are choosing between two projects. The cash flows for the projects are given in the following table ($ million): Project Year 0 Year 1

You are choosing between two projects. The cash flows for the projects are given in the following table ($ million):

Project

Year 0

Year 1

Year 2

Year 3

Year 4

A

negative $ 49$49

$ 24$24

$ 21$21

$ 22$22

$ 14$14

B

negative $ 102$102

$ 18$18

$ 39$39

$ 48$48

$ 62$62

a. What are the IRRs of the two projects?

b. If your discount rate is

5.3 %5.3%,

what are the

NPVs

of the two projects?

c. Why do IRR and NPV rank the two projects differently?

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