0 1 37. A firm is considering Projects S and I, whose cash flows are shown below. These projects are mutually exclusive, equally risky, and not repeatable. The CEO wants to use the IRR criterion, while the CFO favor the NPV method, and you were hired to advise the firm on the best procedure. If the CEO's preferred criterion Is used, how much value will the firm lose as a result of this decision? WACC = 13%. Year CF CF -$1,025 $2,150 $375 $750 $380 $759 3 $385 $768 $390 $777 3. $5.83 b. $6.14 C. $6.46 d. $6.79 e. $7.13 2 4 Year 0 1 38. Ray Inc. is considering Projects Sand L, whose cash flows are shown below. These projects are mutually exclusive, equally risky, and not repeatable. If the decision is made by choosing the project with the higher IRR. how much value will be forgone? Note that under certain conditions choosing projects on the basis of the IRR will not cause any value to be lost because the one with the higher IRR will also have the higher NPV, so no value will be lost if the IRR method is used. WACC = 10%. CF CF -$2,050 $4,300 $750 $1,500 $760 $1,518 $770 $1,536 $780 $1,554 a. $146.59 b. $154.30 c. $162.42 d. $174.67 c. $187.60 2 3 4