Two mutually exclusive projects each require an initial investment of $50,000 and should have a residual value

Question:

Two mutually exclusive projects each require an initial investment of $50,000 and should have a residual value of $10,000 after three years. The following table presents their forecast annual profits.

a. Calculate the IRR of each project. On the basis of their IRRs, which project should be selected?
b. Which project should be selected if the firm€™s cost of capital is 14%?
c. Which project should be selected if the firm€™s cost of capital is 12%?

Cost Of Capital
Cost of capital refers to the opportunity cost of making a specific investment . Cost of capital (COC) is the rate of return that a firm must earn on its project investments to maintain its market value and attract funds. COC is the required rate of...