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E5 - You can choose between two mutually exclusive projects, Project A and Project B. The initial investment (today) is 90 MSEK for project

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E5 - You can choose between two mutually exclusive projects, Project A and Project B. The initial investment (today) is 90 MSEK for project A and 150 MSEK for project B. Thereafter the projects generate the following cash flows in the end of each year during a 5-year period: Project A year 1 2 3 4 5 cash flow (MSEK) 8 8 8 8 140 Project B year 1 2 3 4 5 cash flow (MSEK) 18 18 18 18 180 Discuss and show in a graph with the projects NPV profile why a correct investment decision cannot be based on simply choosing the project with the highest internal rate of return (IRR). (5 p)

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