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 $ 48$48
$ 23$23
$ 21$21
$ 19$19
$ 15$15
B
negative $ 99$99
$ 18$18
$ 42$42
$ 52$52
$ 62$62
a. What are the IRRs of the two projects?
b. If your discount rate is
4.6 %4.6%,
what are the
NPVs
of the two projects?
c. Why do IRR and NPV rank the two projects differently?

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