bA firm is considering investing into one of two

mutually exclusive projects. The first project costs $

$1$

$0$

$,$

$0$

$0$

$0$

$$today and will

generate cash flows of $

$1$

$,$

$8$

$0$

$0$

$$per year for

$1$

$0$

$$years$.$ The

second project costs $

$2$

$0$

$,$

$0$

$0$

$0$

$$today and will generate a one

$-$

time cash flow of $

$2$

$3$

$,$

$1$

$0$

$0$

$$one year from today. The

$($

risk

$-$

adjusted

$)$

$$discount rate for each project is

$1$

$0$

$\%$

$.$

$$Calculate

both the NPV and the IRR for each project. In which project

should you invest and why?