6) The CFO of Giant enterprises has to make a choice between the following two CUORES mutually exclusive projects: CO Project A -400 Project B -200 The opportunity cost of capital is 9%. a) The CFO is tempted by Project B because of its IRR. Show that Project B in fact does have the higher IRR. To find IRR(A): NPV(A)=0=-400+ I C1 +250 +140 300 250 (1+IRR) (1+IRR) find IRR(B): NPV (B)=0=-200+ + C2 +300 +179 140 179 (1+IRR) (1+IRR) + IRR(%) ? ? => IRR 23.3% => IRR 35.9%

PLEASE SHOW MATHEMATICALLY HOW IRR=23.3% and 35.9%

The CFO is tempted by Project B because of its IRR. Show that Project B in fact does have the higher IRR. TofindIRR(A):NPV(A)=0=400+(1+IRR)250+(1+IRR)2300IRR23.3%findIRR(B):NPV(B)=0=200+(1+IRR)140+(1+IRR)2179IRR35.9%