15. IRR rule (S5.3) The following table shows the forecast cash flows for two projects:

C0 C1 C2 C3 C4 C5 A –1,000 20 20 20 20 1,200 B –1,000 50 50 1,050 Now suppose that the term structure is upward sloping and investors demand a higher return on the more distant flows as in the following table:

t 1 2 3 4 5 rt 4.0% 4.5% 5.0% 5.5% 6.0%

Calculate the IRR on the two projects and the NPV. Do the two measures give the same ranking for the two projects? Explain why or why not.