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1. [15 points] Your boss hands you the following cash flow estimates of two mutually exclusive projects that both last for 2 years. Project
1. [15 points] Your boss hands you the following cash flow estimates of two mutually exclusive projects that both last for 2 years. Project A B Cost of Capital, k Investment (t=0) CF1 (t=1) CF2 (t=2) 15% -$10,000 $5,000 $15,000 15% -$10,000 $15,000 $3,000 (1) [2 points] What are the NPVs of Projects A and B, respectively? | (2) [2 points] Using pen & paper or the Excel function, what are the IRRs of Projects A and B, respectively? (3) [2 points] What is your investment decision (i.e., deciding which project to choose) based on the NPV rule? What is your investment decision based on the IRR rule? (4) [9 points] If in Question (3), you have different investment decisions/recommendations based on these two rules, how can you reconcile the findings between these two rules? (show me your steps on reconciling the findings)?
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