Hotel Amazing is attempting to select the best of a group of independent projects competing for the firm’s fixed capital budget of $5.5 million. Management recognizes that any unused portion of this budget will earn less than the 12% cost of capital, thereby resulting in a present value of inflows that is less than the initial investment. A summary of the independent projects are shown in the following table.

a. Use the internal rate of return (IRR) approach to select the best group of projects.

b. Use the net present value (NPV) approach to select the best group of projects.

c. Are the projects selected in parts a and b the same? Explain your answer.

d. Which projects should Hotel Amazing implement? Why?

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Project A B C D E F G Initial investment -$4,900,000 -900,000 -2,100,000 -1,600,000 -750,000 -2,600,000 -1,250,000 IRR 17% 19 18 15 20 19 21 Present value of inflows at 12% $5,600,000 1,250,000 2,250,000 1,800,000 920,000 3,100,000 1,310,000