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

-$50

$25

$22

$22

$13

B

-$101

$21

$39

$49

$60

1. What are the IRRs of the two projects?

2. If your discount rate is 4.6%, what are the NPVs of the two projects?

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

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