2 Highflyer plc has two possible projects to consider. It cannot do both - they are mutually exclusive. The cash flows are:

Highflyer's cost of capital is 12 per cent. Assume unlimited funds. These are the only cash flows associated with the projects. a Calculate the internal rate of return (IRR) for each project. b Calculate the net present value (NPV) for each project. c Compare and explain the results in

(a) and

(b) and indicate which project the company should undertake and why.

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Points in time (yearly intervals) Project A Project B -420,000 -100,000 1 150,000 75,000 2 150,000 75,000 3 150,000 4 150,000 0