• A company is considering two investment options.
• Project A requires an initial investment of $20,000 and provides returns of $6,000 annually for five years.
• Project B requires an initial investment of $35,000 and provides returns of $12,000 annually for four years.
• The company's cost of capital is 8%.
• Calculate the NPV and IRR for each project.
• Determine which project the company should invest in based on NPV and IRR.
Requirements:
1. Calculate the NPV for Project A.
2. Calculate the NPV for Project B.
3. Calculate the IRR for Project A.
4. Calculate the IRR for Project B.
5. Make a recommendation based on NPV and IRR.