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0 1 2 Nm 2. Consider the following cash flows on two mutually exclusive projects. Both projects require an annual return of 14 percent. (12

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0 1 2 Nm 2. Consider the following cash flows on two mutually exclusive projects. Both projects require an annual return of 14 percent. (12 Points) Year Project A Project B -$950,000 -$1,850,000 370,000 900,000 510,000 800,000 420,000 750,000 11.06 16,03 As a financial analyst you are asked the following questions a. Your boss likes the IRR method. If you decision is to accept the project with greater IRR, which project would you choose? b. Because you are fully aware of the IRR rule's scale problem, you calculate the incremental IRR for the cash flows. Based on you computation, which project should you choose? c. To be prudent, you compute the NPV for both projects. Which project should you choose? Is it consistent with the incremental IRR rule? d. Create NPV profile for this problem. What is the significance of the crossover point? e. Rank the projects according to IRR, incremental IRR and NPV methods

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