A firms cost of capital is $12\%.$ The firm has three investments to choose among, the cash flows of each are as follows

Year

A

Discounted CF$($A$)$

B

Discounted CF$($B$)$

C

Discounted CF $$

$1$

$$395$

$-1000$

$-1000$

$$1241$

$-1000$

$2$

$$395$

$`$

$3$

$$395$

$4$

$$1749$

Each investment requires $$1000$ cash outlay, and investments B and C are mutually exclusive.

Which investment should the firm make according to NPVs

project B should be accepted.

Which investment should the firm make according to the IRR$$s

IRR of the $3$ projects are $9\%,20\%$ and $24\%$ respectively. Therefore project C should be accepted as its IRR is highest.

If all funds are invested at $15\%$ which investment should the firm make? Would your answer be different if the reinvestment rate were $12\%$